Less than a month after the UK collectively voted for Brexit, some spooked London home-owners hoping to sell their property have already reduced their asking prices in order to attract interest and secure a sale.
Analysis by the Evening Standard shows that around 1-in-6 of London homes advertised for sale had been reduced in the week-to-10 days following Brexit. Figures show that the price of some homes have been reduced by 15% and there are fears that steeper drops are likely. This worry is heightened when it comes to new developments and there is talk that the price of new luxury apartments currently being built along the Thames could fall by up to 40%.
The reaction has been swift – perhaps quicker than many expected. But, for the remain campaigners, this fast and sharp reaction may not be as much of a surprise. After all, Chancellor of the Exchequer George Osborne warned in May, that UK property prices were likely to suffer in the event of Brexit and could fall by between 10 – 18%. The reality of such steep - and immediate - declines in asking prices for prime central London homes, however, is sure to be a shock to current London property sellers.
But, it might all be doom and gloom. The sharp drop in the pound might just help salvage some sales and possibly even stimulate an increase in overseas interest in London’s uncertain housing market. However, given how savvy most foreign property investors are, they’re likely to take advantage of the double benefit of a weaker pound and lower prices. So, while sales may still be made they’re likely to be more in favour of the buyer’s terms than the sellers.
Indeed, an unnamed, senior property figure told the Evening Standard that “The developers will come back at the end of the summer and look at their prices and they will say ‘if we were asking £450k for a studio pre-Brexit, let’s trim it down to £380’.”
There is a further twist in the tale though. Some overseas property investors might struggle to raise any additional funds from their lender of choice. That’s because some banks are re-considering their strategy on UK property investment loans. Singaporean bank United Overseas Bank, the country’s third largest lender, has called a temporary halt to lending for London property.
“As the aftermath of the UK referendum is still unfolding and given the uncertainties, we need to ensure our customers are cautious with their London property investments,” a UOB spokesperson said.
It also appears that the uncertainty currently being experienced over the economy property market were already bubbling under the surface in the run up to the referendum. Recent data from London property firm Savills shows the erosion of London property values began prior to the in-out vote.
Savills quarterly survey was conducted in the week before the European Union Referendum and showed the average price of property in Prime Central London were 1.4% lower in the second quarter of 2016 than the first quarter. That quarterly decline meant property values were 3.9% lower than a year earlier and some 8% below the peak in the third quarter of 2014.
“There have been conflicting signals in the market in the period post referendum, which suggests the impact of a vote to leave the EU will only become clear over coming months as the market finds its level,” says Lucian Cook, head of UK residential research at Savills.