UK housing market weathers Brexit clouds, but sharp gains unlikely

Britain's expensive housing market has so far weathered the uncertainty swirling around the country's planned departure from the European Union, but average prices are unlikely to rise sharply and will fall in London this year, a Reuters poll found. Nearly three years ago Britons surprised most of the world when they voted to split from the EU, yet it is still unclear how, when or even if the two sides will part ways.

Prime Minister Theresa May said on Sunday she would make a final attempt to get her Brexit divorce deal through parliament before she leaves office, something she has failed to manage three times already. With no resolution in sight, Brexit uncertainty has affected property prices in the capital - long a magnet for foreign speculators - as people have shied away from investing, despite a fall in sterling since the referendum making UK housing a relatively cheaper investment.

Real estate agent Foxtons, which focuses on the London market, said on Monday UK property sales were running at record lows due to the impact of Brexit on consumer confidence. According to the May 10-21 Reuters poll, prices will drop 2.0% in London this year, the same median forecast given in a February survey. But that might not be a bad thing for buyers. When asked to describe the level of London house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 8.5, higher than in previous surveys. Nationally they were rated 6.0.

"It's the same old story - housing is cheap for those with some capital behind them, given low funding costs, but very expensive in terms of the income multiple," said Peter Dixon at Commerzbank. The average annual British salary is about 30,000 pounds ($38,100) and yet the average asking price for a home in Britain was 308,290 pounds this month, and more than double that in London, property website Rightmove said.

For those already on the property ladder, borrowing money is cheap. The Bank of England has set Bank Rate at 0.75 percent and is not expected to raise it any time soon.

YOU AIN'T SEEN NOTHING YET

Looking nationally, over 80% of respondents to an extra question in the poll said the housing market had so far weathered the Brexit uncertainty and price rises are expected to prove fairly robust. Home values will gain 1.2% nationally this year - lagging expectations for general inflation - 2.0% next year and 2.5% in 2021, the poll of 23 housing market watchers said.

"The UK market has remained remarkably resilient," said Russell Quirk at property website Vyomm.com. "So, just imagine the enormity of the 'happy-ending' that will prevail when the current political paralysis ends." Economists in another Reuters poll conducted earlier this month said Britain would eventually agree a free trade deal with the EU and London home prices are expected to rise 1.0% next year and 2.5% in 2021.

However, as negotiations to leave the club Britain joined in 1973 have proved protracted it does not bode well for when talks over future deals with global partners need to be agreed. Over three-quarters of respondents to an additional question said the risks to their forecasts were to the downside. "Whilst everyone is conscious of Brexit we face a further 2-3 years after the Brexit Agreement to deal with the so-called implementation phase," said independent buying agent Henry Pryor. "If you think getting the Withdrawal Agreement done was hard work, I expect you ain't seen nothing yet!"