UK house prices fall ahead of EU referendum, latest index shows
More evidence is emerging that the run up to the referendum on the UK’s future in the European Union is affecting residential property prices.
Property values in England and Wales fell by 0.4% in May, the steepest fall since November 2011, according to the data from the lastest index from Your Move and Reeds Rains.
This takes the average house price to %293,599 and year on year values are still up 6.8% but 5.4% if London and the South East are excluded from the calculation.
However, London’s house prices fell by 0.3% or £1,769 month on month and it was the weakest May for home sales in five years, after stamp duty surcharge caused a rush of buy to let sales in March.
But house prices in Slough defied the trend, jumping 23.3% year on year, with values lifted by Crossrail and new tech jobs, according to the index report.
According to Adrian Gill, director of Your Move and Reeds Rains estate agents, May’s correction in property values also 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, but the main factor is short term confidence ahead of the 23rd June referendum,’ he said.
The year on year growth in house prices has also slowed, down to 6.8% in May, from 7.7% in April. ‘With the Chancellor predicting that a Brexit from the EU would reduce property values by at least 10%, many buyers are holding off until after the uncertainly surrounding the referendum has been resolved,’ Gill explained.
The fall in prices in London has pushed average property values in the capital city back under the £600,000 mark, with the value of a typical home in the city falling to £598,421. However, this decline in property values has not spread across the entire capital. While house prices in the most expensive eleven boroughs have declined by an average of £4,000 or 0.5% from the previous month, values in the cheapest eleven boroughs continue to rise, jumping £3,000 or 0.8% month on month.
But despite maintaining property values well above the rest of the UK, the demand for homes in London continues to grow. In the three months between February and April, sales of homes in London increased by 15%, compared to the same period last year. ‘The majority of this upswing in sales came from flats. As landlords often prefer to provide flats to rent, these properties were a popular choice before the stamp duty surcharge came into force in April,’ said Gill.
He also pointed out that with so much uncertainty in the UK economy, home sales have been subdued. While the total number of property sales did increase from the previous month, this month has seen the fewest May property sales since 2011, when the UK was still recovering from the recession.
‘This uncertainty surrounding the EU referendum will not be resolved until 23rd June at the earliest. However, home sales for the first five months of the year are still 3% higher than the same period in 2015, due to the investment from landlords earlier in the year. This suggest that over the long run, landlords won’t be put off by the reduction in mortgage tax relief, as many believe the sector will still be profitable despite the Government’s attempts to drive them out of the market,’ Gill added.
He also pointed out that not all parts of the market are struggling. For example, house prise in Slough have surged by 23% year on year and more than any other area. The price of a terraced house in slough is now £63,000 more than it was a year ago.
‘Property values in Slough have been boosted by the new Crossrail development, with a new terminus coming into operation in late 2018. The increase in tech jobs in the town has also helped to lift prices, with O2, Nintendo, BlackBerry and McAfee all located along what has been recently branded the Silicon Alley,’ Gill said.
‘As the fastest growing area in the UK, according to the Centre for Cities, with the number of businesses in the town rising by 29% over the last five years, uncertainty in other parts of England and Wales have not hindered growth in Slough,’ he added.