How much will your property be worth after Brexit?

London house price forecast for 2020 drops from 5% to zero as Brexit negotiations stall

It’s not Brexit itself that’s affecting the London property market, but the endless uncertainty surrounding it.

A forecast for London house price growth by 2020 has been downgraded from five per cent to zero, as Theresa May’s Brexit negotiations stall.

In a report released in late 2017, estate agent Savills predicted a two per cent fall in prices in 2018, followed by no change at all this year.

It expected house prices in the capital to regain momentum in 2020, with a five per cent price boost predicted following the UK’s departure from the EU.

However, with little clarity over the terms on which Britain will leave the EU, researchers at the estate agent no longer expect the propertymarket to recover from its current slump next year.

Instead, they now expect house prices to fall by two per cent from the current average of £469,000 this year and remain stagnant in 2020.

Savills also expects prices to rise at half the rate they predicted last year, when they eventually start to pick up, with a 2.5 per cent increase predicted for 2021.

“There’s a lack of clarity on the outcome of negotiations. Whether we get a deal or what the deal is will have less of an impact on the market than the uncertainty,” says Lawrence Bowles, associate director of residential research at Savills.

With the threat of any deal the Prime Minister makes being voted down by Parliament and the shadow of a potential General Election overhanging the country, political uncertainty is the only certainty at the moment.

“When we were forecasting back in 2017 we were working under the assumption that the process would be difficult and high tension but we’d know what the outcome would be by March 2019. That’s no longer the case,” says Bowles.

Long-term house price forecast

Savills predict house prices in London to recover, with an average five-year rise of 4.5 per cent (or £21,000) expected by 2023.

“We’re expecting values to bounce back after the Brexit negotiations but we’re pushing it back and the growth is less than we were previously thinking,” said Bowles.

Other property experts broadly agree with this prediction.

Robert Butterworth, head of research at estate agents Jackson-Stops London: “At present, a significant amount of buyers and sellers in London are holding off on making decisions before firm agreements have been made.”

“We expect to see transactions increase unless the Brexit deal is particularly bad, as it is often economic and political stability that guides both sale and purchase decisions for clients – particularly in the central London market.”

Where should buyers look for higher house price growth?

Savills tips areas with planned infrastructure improvements will see the highest house price growth over the long term, with Crossrail eventually shaving time off journey times from outlying areas to central London and increasing the frequency of trains.

“This points to potential for prices around Abbey Wood, Hayes and Croydon to see higher than average house price growth,” says Bowles.

Longer term, an uplift in values is forecast around such proposed projects as the Bakerloo line extension in south-east London and Crossrail stations running between north and southwest London.

“It’s perhaps worth looking for bargains in those locations if you’re planning to stay put for a while,” says Bowles.

It’s not just Brexit putting the damper on house prices in London

Following a 70 per cent house price increase over the past 10 years, London buyer affordability is stretched to its limit, which has also made mortgage lenders wary about lending to people whose finances are going to be stretched.

This makes areas which have seen lower price growth since the financial crash far more affordable and easier to secure finance in.

The average loan-to-income ratio for first-time buyers is 4.07 in London; in the North West, it’s 3.34.

Prices are expected to rise by 21.6 per cent (£35,000) by 2023 in the region comprising Manchester and its surroundings.

In Yorkshire & Humberside price growth is expected to be 20.5 per cent; in the East and West Midlands and Wales, Savills has forecasted 19.3 per cent.

“It’s getting to the point where the gap between London values and the rest of the country is starting to shrink,” says Bowles.

“However, we expect it to grow again at some point in the longer term. The capital is more productive than the rest of the country, more international, and it will continue to attract people.”

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