London's Property Market in Limbo

UK PROPERTY ADVISORS

The economic uncertainty caused by Brexit has undoubtedly affected the London market, with house price falling year-on-year in many areas and the overall number of sales taking a dramatic dip in recent months. As the urgency for the Brexit deal increases, the UK house prices could become even more volatile.

The pound was trading at just below $1.50 before Britain voted to leave the EU in June 2016. The value of sterling has fallen since then, driven in large part by Brexit uncertainty. When Boris Johnson took over as prime minister in July, its value had dropped to about $1.22. But its value increased by more than 1%, peaking at $1.29 after Mr Johnson's negotiating team agreed on a Brexit deal with the EU on October 2019.

Exchange rate today (21.10.19): 1 British Pound Sterling (GBP) is worth 1.30 US Dollars (USD)

(Data provided by Morningstar for Currency and Coinbase for Cryptocurrency)

Many international sophisticated investors see weak pound as an excellent opportunity to enter the London property market since they can convert their currency and make a great deal.

What will a no-deal Brexit mean for house prices?

While many MPs are strongly opposed to it, a no-deal Brexit remains the default position if an agreement cannot be reached between the UK and EU.

Many business leaders and financial experts have expressed concerns about the potential consequences of leaving without a deal.

Accountancy firm KPMG has predicted that house prices would probably fall by around 6% following a no-deal Brexit, but that they could drop by as much as 20% in a worst-case scenario.

In July, the Office for Budget Responsibility said that a no-deal Brexit could lead to house prices falling by almost 10% by mid-2021. Looking further back, Bank of England governor Mark Carney said in February that UK growth would be 'guaranteed' to fall in the event of a no-deal Brexit.

The latest news

A new version of the Brexit deal has been agreed between the EU and UK on Saturday, 19 October.

For the first time this century, MPs sat in the House of Commons on a Saturday to debate it. Mr Johnson has now - compelled by the so-called Benn Act - sent a letter to the EU to request a three-month delay to Brexit. But Mr Johnson did not sign the letter. He then sent a follow-up one, which he did sign, saying that he does not think there should be an extension. The EU will now consider Mr Johnson's letter.

The default position is still that the UK will leave the EU on 31 October at 23:00 GMT.

What's the main problem?

A no-deal Brexit doesn't stop the UK leaving, but it means there is absolutely no clarity about what happens. While it is a possibility, in reality, neither the UK nor the EU favours a no-deal because it signals a poor political relationship and will cause export issues with Germany and other countries. One of the critical problems with a no-deal scenario is the uncertainty it would mean for life and work in Britain.