The full effects of the referendum on Britain’s economy are still unknown. Stocks are faring relatively well, with the FTSE 100 bursting over 6,700 and the FTSE 250 hitting a post-vote high. The pound remains slumped below $1.32, however, while consumer confidence appears to have taken a tangible knock.
Many business leaders are worried, and some have already begun shifting jobs – but others are choosing to look on the bright side, and are taking advantage of the opportunities that arise during uncertain times.
And whither house prices? The first major piece of evidence collected in the wake of the Brexit vote was certainly bearish, with a huge majority of chartered surveyors predicting a drop in London’s prices over the next 12 months. The outlook is worrying if you’re a homeowner in the capital, but what about those who have been frozen out by the rapid increase in prices during recent years? With the average London home costing nearly half a million pounds according to the Office for National Statistics (ONS), wouldn’t a downturn bring some welcome relief to thousands of prospective first-time buyers?
Unfortunately, the answer is likely to be “no”, for one simple reason – if an economic jolt from Brexit rocks house prices, it will almost certainly impact people’s finances and wellbeing in other areas of their lives, too.
As Labour leader Jeremy Corbyn mentioned yesterday, the proportion of Brits who own their homes has been falling (and as Prime Minister Theresa May countered – it fell notably during Labour’s 13 years in power). The primary reason for the decline is an increase in prices relative to incomes. While unemployment has fallen impressively since the recession, wage growth has failed to take off – and most economists forecast it to stay slumped following the outcome of the referendum. An expected uptick in inflation would also diminish hopes of real wage growth.
As we have argued in City A.M. on numerous occasions, the capital needs more housing – and that means a relaxation of planning laws to allow more densification, or a relaxation of laws that prevent development in the green belt. Both options are politically unpopular – but only by significantly increasing supply can we reduce house prices, or even moderate their growth, to an extent that will benefit aspiring homeowners.