UK voters will soon have a momentous political decision to make. On 23 June they’ll be asked to decide whether or not the UK should be leaving the EU (European Union). But what effect would leaving have on London property prices?
While debate rages about the pros and cons of remaining in the EU, London estate agent Williams Lynch says the value of property in Southwark – at the centre of the firm’s SE1 postcode base – has jumped 75% in the past 10 years thanks to the growth of the London Bridge business quarter.
But central London estate agent LDG warns property values could suffer in the two years it is likely take for Britain to negotiate its exit from the EU as a result of the economic uncertainty this process will create.
On the other hand, if Britain votes to stay in the EU the reforms to our membership recently negotiated by Prime Minister David Cameron will be implemented.
Those changes, which include making the UK’s financial services industry immune to Eurozone regulations, aim to give Britain more control over its affairs.
If the much talked about Brexit becomes a reality after 23 June, the UK would become the first state to break away from the EU since Greenland voted to leave in 1982.
Greenland’s exit was agreed in 1985 following lengthy negotiations over fishing rights that resulted in the Greenland Treaty of 1984.
But as a member of the Association of the Overseas Countries and Territories of the European Union, Greenland remains subject to EU treaties.
Current opinion poll data indicates that approximately 1 in 3 people are convinced that their home would be worth more if Britain left the EU and approximately 1 in 5 believe they’d see a drop in value.
In the short term, at least, it’s difficult to see how leaving the EU would increase the value of the UK’s residential and commercial properties.
Major political and economic changes tend to provoke uncertainty – the prime central London property market ground to a virtual halt in the run up to the General Election in 2015 when a key plank of the Labour Party’s manifesto was to impose a mansion tax on the owners of properties worth £2m or more, points of West Hampstead estate agent Paramount Properties.
In the post-Brexit landscape people could become reluctant to make major investments in London or alter their living or working arrangements.
Many people would also need time to adjust to the post-Brexit financial landscape and assess its impact on interest rates, mortgages and employment rates before buying or selling property.
The resulting drop in demand for UK property would push prices down. If the UK leaving the EU made companies think twice about investing and creating jobs here (as investment bank Credit Suisse has predicted), the property market would suffer even more.
This June, if the Brexit campaigners win, all eyes are likely to turn to London. Its high standard of living, vibrant business community and world-class culture make London the UK’s property hotspot. If the market entered a quiet period and prices dropped, London property would become more accessible to buyers on a wider range of budgets. However, London property owners wouldn’t be pleased to see the value of their investments fall.
The fate of property prices in a post-Brexit London would also depend on whether new financial and immigration rules made settling in the capital harder for non-UK citizens than is currently the case.
Indeed, if the UK leaves the EU, the government will surely need to think carefully about the needs of property buyers and sellers from both the UK and further afield.