Mortgages  

House prices slump before EU referendum

House prices slump before EU referendum

Property values dipped 0.4 per cent in May, the steepest fall since November 2011, as the housing market holds its breath ahead of the European Union referendum.

Your Move’s latest index showed London’s house prices fell by 0.3 per cent (£1,769) month-on-month, with the weakest May for home sales in five years.

However, house prices in Slough defied the trend, jumping 23.3 per cent year-on-year, with values lifted by Crossrail and new technology jobs.

Article continues after advert

The price of a terraced house in David Brent country is now £63,000 more than it was a year ago.

House Price

Index

Monthly Change %

Annual Change %

Annual % (excluding London, the East & the SE)

£293,599

286.6

-0.4

6.8

5.4

 

Richard Sexton, director of e.surv chartered surveyors, said 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.

“The year-on-year growth in house prices has also slowed, decelerating to 6.8 per cent in May, from 7.7 per cent in April,” he stated.

“With the chancellor predicting that a Brexit from the EU would reduce property values by at least 10 per cent, many buyers are holding off until after the uncertainly surrounding the referendum has been resolved.”

However, home sales for the first five months of the year are still 3 per cent higher than the same period in 2015, due to the investment from landlords earlier in the year.

This suggests that over the long-run, landlords will be put off by the reduction in mortgage tax relief, said Mr Sexton, as many believe the sector will still be profitable despite the government’s attempts to drive them out of the market.

Meanwhile, a YouGov survey of 1,735 UK adults at the end of May, on behalf of alternative finance platform Wellesley Finance, found people were dived on the effects of the EU referendum on house prices.

Younger generations were the most worried, with 28 per cent of 18 to 24 year-olds thinking it will become less affordable if the country votes to leave.

Meanwhile, only one in 10 of those aged 65 or older think that this will be the case, while 18 per cent of this age group actually think affordability will improve.

This is a view shared by a third of UKIP voters, but just 12 per cent of Labour supporters were optimistic that housing will become more affordable.

Graham Wellesley, founder and chief executive of Wellesley Finance, said: “We believe that a short term drop in property prices is due to the short term uncertainty. Prices in Central London above £1.5m have seen a slowdown already due to changes in Stamp Duty and the availability of funding, while the market under £1.5m appears to be stronger.”

peter.walker@ft.com