UK house prices fall, but not because of Brexit

UK house prices fell in May 2016, as the UK prepares to vote on its future within the EU. The fear of a Brexit, though, is not necessarily the cause.

Prices dipped 0.4 per cent last month, the steepest fall recorded since November 2011, according to the latest figures from Your Move and Reeds Rains. London’s house prices also fell 0.3 per cent (£1,769) month-on-month.

While it is easy to pin the blame for the property slump on the EU Referendum, though, the market is also recovering from a surge in transactions earlier this year. May was the “weakest in five years” for home sales, notes Your Move, but it is the rush of buy-to-let sales brought forward to March that has led to this decline, a trend that is amplified by seller uncertainty surrounding the EU vote.

Adrian Gill, director of Your Move and Reeds Rains estate agents, comments: “The housing market is holding its breath ahead of the EU referendum and after a rapid sprint at the start of the year… May’s correction in property values follows on from a surge in activity earlier in the year, when second-home buyers and landlords brought forward their purchases to avoid the stamp duty surcharge. That tax hike and the Government’s anti-landlord policies are weighing down the market.”

While Gill argues that main factor is short-term confidence ahead of 23rd June, Ben Habib, CEO of AIM-listed First Property Group plc, comments: “The slowdown in the current housing market is less to do with Brexit than it is to do with the very rapid rise in house prices we have seen over the last few years. We have also been seeing a similar slowdown in the commercial property market. It’s very easy to blame everything on Brexit, but costs have gone up very substantially over the last few years.”

UK house prices are expected to experience a short-term drop for the first time since 2012, according to the latest Residential Market Survey from RICS.

Nonetheless, “there is not at this point a sense that a fundamental shift is taking place in the market,” adds Simon Rubinsohn, RICS Chief Economist.

Indeed, house prices in Slough defied the trend, jumping 23.3 per cent year on year, with values ifted by Crossrail and new tech jobs

“In London, house prices have slipped from last month’s record high, falling 0.3% (£1,769) month-on-month. This has pushed average property values in the capital back under the £600,000 mark, with the value of a typical home in the city falling to £598,421<" adds Gill. "However, this decline in property values has not spread across the entire capital."