Head of Research Nicola Almond considers how the triggering of Article 50 will affect the London property market
Yesterday Theresa May triggered Article 50, starting two years of negotiations which will lead to Britain’s exit from the European Union.
What will this mean for the London property market?
On balance the triggering of Brexit should act as a fillip to the market, especially in London, where confidence and property prices are particularly sensitive to the Brexit issue. Sales volumes fell after last year’s vote to leave the EU, although the stamp duty increases were arguably more to blame for this decline.
This may not last however, because whilst in the short term some of the uncertainty arising from last June’s referendum will be dissipated, in the longer term the protracted negotiations may not run smoothly and uncertainty about the impact of Brexit on the economy and jobs is likely to persist for some time.
On the positive side, worries that economic growth will be dampened by the Brexit process are expected to deter the Bank of England from raising interest rates despite rising inflation. Continuing low interest rates will help prevent any further deterioration in affordability, which is especially an issue in London. Also, as sterling is unlikely to recover to pre-Brexit levels, the continuing relative weakness of the pound will continue to attract overseas investors by more than offsetting increases in stamp duty.
The main issue for the London housing market remains however the structural imbalance between supply and demand, and this is unlikely to be resolved any time soon, despite the various measures outlined in February’s Housing White Paper. So although yesterday’s move to start the Brexit process will provide a welcome boost to confidence in the market, it does not bring us any nearer to resolving the challenge of delivering housing in sufficient numbers that the ordinary Londoner can afford to buy.