While house prices in UK cities continue to soar, a Brexit vote could send property values and sales plummeting, with London bearing the brunt.
Leaving the EU could result in a fall in housing transactions of 10% in UK cities and as much as 15% in London, new research has revealed.
Analysis by Hometrack looked at 20 years of house price growth and found that uncertainty amongst consumers over the outlook for the economy and personal finances tend to have a greater impact on the volume of housing transactions rather than house prices.
A recent study by the Treasury found that a Brexit vote could send house prices plummeting by up to 18%.
Richard Donnell, Insight Director at Hometrack, said: “The economic impacts of a vote to leave will dictate the impact in the housing market. Our analysis of how the market has responded to external factors over the last 20 year suggests that a vote to leave on 23 June could result in a 5% to 10% fall in housing turnover with London bearing the brunt.
“After a period of strong house price inflation over the last five years, the London market faces greater headwinds irrespective of the referendum vote. Turnover fell 7% last year on the back of affordability constraints and weaker overseas demand. Tax changes for investors will reduce demand and we expect price growth to slow in the near future even if sterling were to weaken and improve the relative value of central London property.”
Since 1996, sales volumes fell on four occasions in London by as much as 15%, highlighting how the capital is more prone to the impact of external factors.
There was the collapse of the Long Term Capital Management hedge fund in 1998, the bursting of the dot-com bubble in 2000 and the Iraq war in 2003. The 2011/12 eurozone crisis had less of an impact on turnover as the market was just starting to recover after the 2008 financial crisis.
Hometrack said a vote to remain would deliver a boost to market confidence and benefit large regional cities such as Manchester, Leeds and Birmingham where housing demand is growing.
The latest Hometrack UK Cities House Price Index reveals that city level house price growth has risen 10.4% to £232,800 in the past year. This compares to 6.6% 12 months ago when growth slowed in the face of uncertainty over the 2015 general election.
Most cities registered a spike in monthly house price growth ahead of the April stamp duty increase. Cambridge continues to lead the way, recording a 15.8% increase while Aberdeen is the only UK city bucking the upward trend posting a fall of -6.1%.
Donnell said: “A vote to remain will have the greatest upside for house prices and transactions in regional cities where the recovery has been more short-lived and affordability less stretched than in southern cities. The boost to confidence from a vote to remain, coupled with low mortgage rates would most likely benefit cities such as Manchester, Leeds and Birmingham as housing demand and price growth seems set to sustain itself.”
Earlier this month, the International Monetary Fund said a vote to leave the EU could send house prices crashing and severely damage the UK economy.
According to a joint study by the Cebr for the National Association of Estate Agents and the Association of Residential Letting Agents, exiting the European Union could wipe a staggering £26.5 billion off total property values.
The research also found imposing greater restrictions on foreign workers as a result of a Brexit vote could hit the UK’s ability to build homes.
However, the Remain camp has been accused of scaremongering. Many industry experts have said that leaving the EU is unlikely to affect mortgages or house prices.
A recent report from the Royal Institute of Chartered Surveyors found that while prime property prices in London will likely fall if the UK decides to break away, house prices in the rest of the country are likely to weather the market turmoil following a Brexit vote.
City level house price inflation – Hometrack 20 Cities House Price Index
| City | Average price | % current | % 12 months ago |
| Cambridge | £411,900 | 15.8% | 8.6% |
| London | £466,000 | 14.4% | 9.3% |
| Bristol | £247,500 | 13.8% | 8.1% |
| Portsmouth | £210,400 | 9.0% | 7.0% |
| Southampton | £208,600 | 9.0% | 5.9% |
| Bournemouth | £259,700 | 8.6% | 5.5% |
| Birmingham | £140,200 | 8.3% | 3.4% |
| Manchester | £142,600 | 7.8% | 4.3% |
| Leicester | £149,200 | 7.4% | 4.2% |
| Oxford | £393,100 | 7.1% | 11.8% |
| Leeds | £147,600 | 6.7% | 4.5% |
| Cardiff | £186,100 | 6.3% | 5.4% |
| Nottingham | £133,200 | 5.9% | 4.3% |
| Liverpool | £109,100 | 5.5% | 1.0% |
| Sheffield | £126,100 | 4.7% | 3.6% |
| Belfast | £122,600 | 4.1% | 6.9% |
| Edinburgh | £196,500 | 4.0% | 4.8% |
| Glasgow | £109,100 | 3.5% | 4.5% |
| Newcastle | £123,400 | 2.5% | 2.2% |
| Aberdeen | £183,400 | -6.1% | 3.3% |
| 20 city index | £232,800 | 10.4% | 6.6% |
| UK | £197,100 | 8.3% | 5.3% |
Surely a fall in house prices is likely to benefit younger non-houseowners more than the older home-owning population.
These very same people (it is reported) are more likely to vote to remain.
How ironic.
The must of course see the bigger picture.