London house-buyers get lift from Brexit
At 24, Londoner Kai Brader-Tan did not expect to become a property owner so soon in a city where rocketing prices in recent years have prevented many of his peers from getting onto the housing ladder.
But the Brexit vote may have given him a step up.A graduate in Chinese and economics now working for a sportswear company, Brader-Tan has bought his first-ever flat in south London’s gentrifying Brixton area.
“It’s been a fortunate turn of events,” he told AFP, explaining that a drop in the asking price from 550,000 to 500,000 finally helped clinch the deal.
The capital’s housing sector has been affected by a decline in investment from abroad which many experts have blamed on last year’s Brexit referendum.
London house prices may be more than double the national average, but are now growing more slowly than in any other region in the country - the first time in 10 years that this has happened.
One report last month even showed them falling.
A rise in inflation to three percent and the quarter-point increase in interest rates projected for November could bring down prices even more.
But there is little cause for celebration among developers, estate agents and investors.
“The B-Word is the real concern,” said Paul Steward, a strategist at Barings investment management firm.
“The hike in rates is tiny and we think this inflation is a blip. We’re more worried about the downward economic trend overall,” he said.
Martijn Vos, portfolio manager for European investments at Dutch financial services group APG, agreed.
“The issue is not so much interest rates and inflation, but the EU referendum,” Vos said.
Once the uncertainties surrounding the Brexit process have been settled, “we can see how to deal with the other factors.”
Foreign investors have been examining the fall in the average property price by 0.6 percent year-on-year in the last three months - the first such decline since 2005, according to data gathered by Nationwide, the U.K.’s largest mortgage provider.
Just weeks before the U.K. voted to leave the European Union in June 2016, London’s housing market was comfortably ahead of the rest of the country in terms of growth, official statistics show.
But by the end of the month, London was no longer the fastest-growing region, and the capital has not recovered its crown since.
Foreign direct investment into U.K. property plummeted from a five-year-high of 214 million (241 million euros, $280 million) in the third quarter of 2016 to 77 million in the second quarter of 2017.
“In central London, investment has been dominated by foreign high-net wealth... and this has sort of saturated,” said Kim Politzer, director of European Research at investment manager Invesco Real Estate.