U.K. House Prices Seen Dropping for First Time Since 2012by
RICS survey shows London home prices already falling in May
EU referendum, waning demand after tax change weigh on market
U.K. house prices look set to dip for the first time since 2012 amid uncertainty before Britain’s vote on European Union membership and as a new tax on buy-to-let properties and second homes kicks in.
Home prices in central London are already falling, according to May data from the Royal Institution of Chartered Surveyors. While they continue to increase modestly across the rest of the U.K., 10 percent more respondents predicted that they will fall than expect them to rise in the coming three months. The U.K. capital and East Anglia will be worst hit, the report shows.
RICS members “constantly are now talking about uncertainty,” Chief Economist Simon Rubinsohn said in an interview on Bloomberg Television’s “On The Move” with Guy Johnson. “Obviously the referendum is a big story. The tax changes are also really having an impact.”
Housing demand dropped at the fastest pace since 2008, falling for a second month, RICS said. The number of agreed sales also declined for the second consecutive month. In the longer term, rents look set to outpace house price growth, rising 4.7 percent annually over the next five years, RICS said.
Uncertainty surrounding the June 23 EU referendum is weighing on investment and hiring in the U.K., with the Bank of England and other institutions warning that leaving the bloc would damage the economy.
“If there is no vote for Brexit and growth re-accelerates in the second half 2016, as we expect, sentiment in the housing market may turn,” Allan Monks, an economist at JPMorgan Chase in London, wrote in a note to clients. “But the current risk, under either referendum scenario, is that growth doesn’t fully recovery its lost ground – with the housing market taking longer to recover too.”
Concern about the vote also weighed on home lending, which slid to a 12-month low in May, according to e.surv, the U.K.’s largest residential chartered surveyor. House purchase approvals have fallen more than 10 percent over the last three months after peaking at the start of the year.
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“The EU referendum is causing some nervousness within financial circles and bringing new unknowns with it,” said Richard Sexton, a director at e.surv. “This political milestone could impact the U.K.’s economic outlook and slowing growth could pose problems of its own for both lenders and borrowers.”