![Savills calls turning point in London property market](https://www.propertyforum.com/wp-content/uploads/2015/04/london-street.jpg)
So far the London housing market has performed better than many had expected in light of last year’s Brexit vote. At this moment in time the average house in London is valued at 12 times the average London wage which compares to just six times for the UK average. As a consequence, perhaps it is sensible to assume that the more financial sector jobs which move away from London the more downward pressure on London house prices?
Jobs leaving London
While we have been down this road before, at this moment in time it is believed that 24,000 jobs are set to relocate outside of the UK in light of Brexit. This figure could rise to as high as 85,000 in a worst-case scenario if London was to lose it “financial passport” to the European Union. Ireland and France are likely to be significant beneficiaries because of their location but other areas of Europe are also hovering over the London financial markets. This despite the fact that the UK government has promised to do whatever it takes to maintain stability of the London financial markets in light of Brexit.
It is also worth noting that there has been a 24% reduction in net migration between June and December 2016 primarily because of Brexit. If you bear in mind that workers from the EU contribute to 17% of London’s workforce against just 7% for the UK as a whole, this begins to reflect the potential challenges of Brexit.
Forced sellers
If London was to lose anywhere near the number of employment position said to be at risk because of Brexit this could create a number of forced sellers. Societe Generale believes that forced sellers could drag London house prices downwards with particular emphasis on properties exceeding a valuation of £2 million. It is difficult to say with any great confidence the level of impact this could have on London property prices but it would certainly be a drag. Indeed, Societe Generale has been talking of a price correction in the higher echelons of the London housing market of up to 50%.
London house prices defy gravity
This is not the first time we have seen statistics and views seemingly backing house price correction in London. Time and time again there is criticism of the value to income ratio, rental levels and employment prospects. However, time and time again the London housing market seems to buck the trend, move in its own direction ignoring traditional measurement barometers and ratios.
As we have mentioned on numerous occasions, it is also worth noting that a significant fall in the value of sterling against the likes of the dollar and the euro has increased foreign investor relative spending strength by up to 20%. There is some talk that the UK political scene this too “unstable” and investors may look towards the European Union, in a stark about turn to the situation just two years ago, but is the European Union really over the worst?
At this moment in time the European Union is going to great lengths to attack the UK, undermine the government and extend Brexit talks for a long as possible. There has been talk of tweaking the EU immigration policy, welcoming the UK back with open arms and even a suggestion that the single market is not out of bounds. Whether London and the rest of the UK has hit rock bottom yet with regards to house prices and economic activity remains to be seen but the idea that the European Union has somehow “found its feet” and is now an economic powerhouse is surely a little far-fetched?