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Is Brexit Impacting on the London Property Market

Is Brexit Impacting on the London Property Market

THE BREXIT deadline of 29 March is fast approaching, and home owners are beginning to worry how leaving the European Union will have an impact on house prices. 

Although Brexit does play a factor, in reality, markets have slowed in London as of late, simply because of the exorbitant prices. Sales were a bit sluggish because fewer people could afford the high prices, and with recent tax changes that were in effect if you purchased after April, this meant buyers were completing purchases before the referendum, which would create a softer market. The impact of Brexit has been felt the most in the London luxury market. With some sellers reluctant to sell, as well as more interest from foreign buyers as they stand to get the equivalent of 20 percent discount with the euro being very strong, and the pound still at an all time low.

There are many things to consider when looking at house prices but affordability will always be a key factor. A house that sits neatly within the budget of one person may be an unobtainable dream for other buyers. When looking for a mortgage, income levels play a big role in what lenders are prepared to provide and this is why your earnings have a significant role to play in what sort of property you can afford to buy.

This is why information provided by Hometrack may be concerning to some potential buyers. It has been announced that London house prices are currently at a level of 14.5 times the earnings of the average London resident. This is the highest this figure has ever reached and it provides a different slant to the behaviour of prices in the London property market.

The ratio between house prices and income is rising

Even though the growth of house prices has slowed in the capital in the past year, with prices falling in some areas of London, this information indicates how difficult it can be for many people to get on to the property ladder. Even if prices slow or fall, if they move further away from average incomes, it is less likely people will be able to afford to buy property. In 2016, London house prices were recognised as being 14 times the average income, which at that point, was a record in itself.

It is not as though London is the only part of the United Kingdom that is experiencing this situation. Cambridge trails the capital closely and the average property in this city is 14.3 times the level of average earnings. However, given the scale of sums involved and the level of interest in the London property market, it is easy to see why the media focuses on the capital.

The London property market is not a single entity

Of course, there are always two sides to the property market and some property owners may welcome rising house prices. According to Hometrack, house prices in the capital have increased by 3% in the past month but it is important to remember that there are very different sectors of the London property market. In central London, there is an opinion that the market is flat and that prices are falling in many areas. There has also been a suggestion that there is a difference between the asking price and the selling price of 8 to 10%.

It is the outer areas of London, moving away from the centre, that ensure that average London property prices are increasing. In the same findings, it was highlighted that Clapton has experienced the highest growth rate in the city, with an increase of 5% in prices. The North East of London is certainly an area that is performing better than many parts of the centre and west of the capital, and this is an area of the London property market that people are turning towards.



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