London House Prices Rocked by Brexit

Respondents to the RICS survey expect lower house price growth over the next five years.
By Lisa Botter ,

London house prices have fallen on Brexit uncertainty, a survey has shown.

Figures from the Royal Institution of Chartered Surveyors show the index of London house prices fell to minus 46 in June. This is the weakest reading since the height of the financial crisis in early 2009. The index, which captures sales data on completed transactions,  is a leading indicator of housing market sentiment in the U.K.

The survey of real estate agents was done after the June 23 Brexit referendum.

The RICS residential market survey shows demand has fallen throughout the U.K. The sharpest decline was in London, where a majority of surveyors saw a decline in buyer interest.

"Anecdotal evidence suggests that uncertainty relating to the EU referendum result was the primary driver of the slump although the higher [tax] rates at the upper end of the market also continue to weigh on demand," RICS said.

Respondents to the survey expect demand to fall in the coming three months. The uncertainty is expected to continue in the short term, with more respondents saying that downward pressure will continue over the next 12 months.

Price growth over the medium term is expected to slow, with respondents forecasting growth of 14% over the next five years in June, compared with a figure of 20% in May.

London-listed real estate agent Foxtons has seen shares drop today. Shares were recently down 4.6% and have dropped more than 25% since the referendum. Foxtons issued a warning on its full-year earnings in late June, saying it expects group revenue and adjusted earnings to be "significantly lower" than the previous year. The company attributed the downturn to prolonged and increased uncertainty due to the referendum, which will "now likely continue for at least the remained of the year." It now forecasts first-half 2016 adjusted earnings "in the region of 20%."

House builder Taylor Wimpey (TWODY) was up 3.1%,and peer  Barratt Developments gained 2.87%.

UBS likes U.K. home builders, with analysts last week saying that 40% of the post-referendum movement in share prices was overdone. Current levels now provide an attractive entry point, the note said, before going on to outline why the bank believes a U.K. housing market catastrophe can be avoided.

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