In a report released by the Office of National Statistics (ONS), house prices in the south of England, with London having the poorest performance. One of the vital findings of the price index showed that the London property market has average prices dipping to 2.9% over the year since March 2018 until June this year.
The report reflects the biggest fall in the capital property market as London continues to correct its prices after nearly two decades of unceasing growth. The slump in average prices in three regions of southern England can be attributed to the uncertainty that looms over the nation every time the regions creeps closer to the EU arrives at a no-deal. This causes investors to become hesitant in investing in several areas of the property market.
As no-deal Brexit looms, the property market will probably remain stagnant. This will ultimately cause property buyers to step back, wait, and see what will happen next.
London Property Market Overshadow UK Growth
The 2.9% drop in London housing prices overshadowed the increase in property prices in most areas of the UK. Looking at the numbers on a national level, average house prices increased by as much as 4.4%, particularly in Wales.
BBC pointed out that house prices between April and June in Northern Ireland is up by 3.5% compared with the same period last year. East Midlands also posted a 3.2% growth whereas West Midlands house prices increased by 2.6%.
Brexit Affecting Investor Confidence
How the market will respond to Brexit come October is still unclear. One thing is for sure, though. It will have a significant effect on investor confidence. In the next few months, the housing market is likely to suffer.
Consumers are, expectedly, hesitant to buy a house, particularly as house prices become higher in relation to their incomes. The uncertainty in the labour market and income growth also contribute to low investor confidence. All these will cause house prices to increase by no more than 1.5% in the next coming months.
Since the Brexit referendum in June 2016, London’s property market struggled significantly. This is as house prices were appreciating by as much as 8.2% at that time. Both buyers and sellers are waiting for some semblance of political certainty before they enter the market.
Nationwide’s chief economist, Robert Gardner echoes this sentiment. Gardner said that property prices highly depend on how the UK will deal with Brexit. He added that consumer emotion plays a big part in the housing market. The market will only grow after the resolution of all the fears and uncertainties.
Saturated property market hubs like London are bearing the brunt of this uncertainty. These areas are most sensitive to even minute price variations. For this reason, the provinces are beating London in terms of the property market.
This dip in the London property market is only short-term. Aside from house prices, the supply of homes dropped as well so the balance of demand and supply is now in favour of the buyers. As a result, it is highly unlikely for the house prices to continue dropping.