Despite an overwhelming remain vote of over 32,134 people in the borough of Hammersmith and Fulham it appears that the UK will be leaving the European Union. What can we expect to happen to the property market in London and Fulham?
The affect of the Brexit has already been felt in the markets, with the FTSE surrendering up to £85b in the last two days and the Pound at a 31 year low against the Dollar. We can only wait and see how this is going to affect the slower moving property market as the consequences unravel over the coming weeks and months.
What is clear though is that shares within the property sector have taken a pummeling. Home builders Persimmon and Barratt Developments saw shares prices drop by as much as 40% on Friday, some of the largest falls in the market off the back of fears of increased labour costs. London estate agent Foxtons have seen a 23% drop in its share price after it issued a profit warning with other London estate agencies apparently immediately experiencing some larger deals falling apart.
All this points towards a reduction in turnover as uncertainty starts to freeze over the property marketplace. Question is, will this be a cold snap or a full on ice age? The market has been sluggish since 2014 especially at the top end, while lower priced properties - beneath £1m in Fulham and around the £500k mark London-wide - have enjoyed tremendous demand powered by cheap lending. We were just beginning to see a thawing at the upper end of the property market, with deals beginning to happen above the £2m mark but now expect this to dial back again, although frankly the stagnation at this level can surely only continue so long.
Can we expect the amount of serious buyers and sellers in the market to reduce? Probably. We can also expect the gap between buyers and seller’s expectations to widen as sellers keep asking prices fairly steady. Deals done however may likely be lower than expected, at prices lower than expected. Richard Donnell from the property analysts Hometrack said that the immediate impact of the vote “is likely to be a fall in housing turnover and a rapid deceleration in house price growth”; stopping short of saying prices would actually decrease.
Whilst George Osborne predicted a drop in house prices of between 10%-18% ahead of the referendum, this certainly happened last time there was uncertainty in the markets during the last crash. In prime areas such as Fulham, though, people chose not selling over achieving a lower price, which mainly resulted in a drop in turnover of up to 70% and arguably contributed to the price surge experienced later on in 2012-14.
Could the silver lining in all of this be the weakening of the Pound? The London property market has long been a safe haven for global wealth, and Fulham in particular has many foreign buyers, especially from France. Property will certainly be cheaper for those of them buying in Euro’s. What is interesting was how the Brexit and the drop in the Pound contributed to markets in continental Europe, Germany’s DAX and France’s CAC 40 dropping more than double the amount of the FTSE. Could we also see other European nationalities moving money into London property because they see it as a safer harbour from a larger storm that is brewing over the rest of the EU? Who knows?
What is certain though is that with both the major political parties imploding, not to mention the doubt over Scotland’s position there will be a rolling storm of political unrest that has the potential to slow the market right down over an extended period. What that means for the average buyer and seller is that it’s likely going to become a whole lot more frustrating to get a deal done in the short term.
On the other hand though, over 50% of the population thought that the UK would be better off out of the EU, and who knows, maybe they’ll be proven right. There’s a good argument that the Brexit will strengthen brand Britain in the long term on the world stage and that would secure London’s property market for decades to come.
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