It Could Happen

Outside London, Property Might Survive the Road to Brexit

Inside the capital it's another story.
Simon Dawson/Bloomberg
RIGHTMOVE PLC
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London's housing market has had a glorious run. That's been unwinding since the Brexit vote -- you can blame unaffordable prices mixed with political uncertainty.

Hard Hit

Since the Brexit vote, house prices in London has been underperforming the nation overall

Source: Nationwide via Bloomberg

The bad news deepened on Monday, as Rightmove Plc published estimates that asking prices for London’s top-tier homes will fall 2 percent in 2018.

But a closer look shows that the news isn't glum for everyone. For the country as a whole, Rightmove sees asking prices picking up by 1 percent. For entry-level properties, the gain could be 3 percent.

London Asking Price

Home sellers are asking for less in all segments of London, except for the most affordable neighborhoods farthest from the center

Source: Rightmove

Note: Rightmove categorizes first-time-buyer sector as properties with two bedrooms or fewer; second-steppers are three and non-detached four bedrooms; top are four bedroom detached and five bedrooms or more.

While pricier property has faltered, the rest of the country has coasted along, especially in the lower- and mid-priced segments of the market.

National Asking Price

Sellers are requesting more for their homes, except for those with the biggest houses

Source: Rightmove

Note: Rightmove categorizes first-time-buyer sector as properties with two bedrooms or fewer; second-steppers are three and non-detached four bedrooms; top are four bedroom detached and five bedrooms or more.

Though political uncertainty persists, and consumers are getting squeezed by faster inflation and sluggish wage growth, the British housing market outside the capital might just survive the road to Brexit.

A third quarter survey by the Bank of England found lenders expect credit conditions for house buyers to remain fairly stable. 

And the BOE forecasts growth in real household income next year, however modest.

Money in the Pocket

The Bank of England raised its forecast for real post-tax household income growth for 2018, and sees modest growth thereafter

Source: Bank of England

Though inflation data for November published Tuesday showed the rate broke the central bank's 3 percent upper limit for the first time since 2012, it should turn downward. This will help support a rebound in household confidence next year, according to Kallum Pickering, an economist at Berenberg Bank.

All of this should support demand for property. Though the bank's survey of lenders didn't account for the quarter-point rate increase in November, it's hard to see that small amount of tightening being the decisive factor in keeping people from buying. 

So, barring drastic news, British property outside the capital should continue to weather what’s coming at it. 

London is another story.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Elaine He in London at ehe36@bloomberg.net

    To contact the editor responsible for this story:
    Jennifer Ryan at jryan13@bloomberg.net

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