Brexit:London house prices expected to fall in the short term following EU Leave vote - but analysts predict long-term gains

The property market is bracing itself for reduced transactions and tumbling prices. But experts remain positive the industry can weather the storm triggered by Britain's departure from the European Union...

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The impact of Britain’s exit from the European Union is already being felt with house prices in the capital expected to fall more sharply than in the rest of the country.

Analysts are predicting that our departure from the EU will impact prices in the short to medium term but they remain upbeat that this is a welcome correction and that the industry will recover.

No country has ever left the 28 member EU and the market uncertainty created by Brexit – which this morning sent the value of the pound plummeting to its lowest level in 31 years – is expected to have a ripple effect on the property market.

Housebuilders’ shares – an indicator for the overall health of the property market – were among the biggest fallers on the FTSE 100 this morning, with Barratt, Persimmon and Berkeley all tumbling more than 20 per cent in early trading.

But experts are already championing the potential opportunities created by Brexit.

Welcome correction
The weeks running up to the referendum saw the average price of a London home drop by £971 (0.2 per cent) to £643,117. Nationwide house prices rose in the same period on average by £2,320 (+0.8 per cent), meaning that even before the results were in London was already lagging behind the rest of the UK by a full percentage point.

The Treasury has predicted that house prices could crash by between 10 and 18 per cent over the next two years. While the National Association of Estate Agents believes up to £7,500 could be lost on the London average over the next three years.

Miles Shipside, Rightmove’s director and housing market analyst, said: “Markets typically dislike uncertainty, and London’s fall in prices seems to be in line with what one would expect, though for some reason it is out of kilter with the rest of the country.”

“We’ve become accustomed to prices rising in London and now that the pace of rises has slackened it’s easy to forget that the price of property coming to market is still £228,632 higher than it was six years ago.”

Adam Challis, head of residential research at JLL, also expects the cooling effect to be chillier in London than elsewhere in the UK. “The interconnected trading relationship between London and the rest of Europe means the implications are more complex. This will exacerbate the uncertainty for London’s home owners,” he said, adding that the company expects price falls of three to five per cent in both 2017 and 2018.

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