Skip navigation Scroll to top
Scroll to top

Are current house prices reflecting the UK economy or Brexit fears?

19 July 2019

There are a number of factors that should support rising UK house prices; unemployment is at the lowest level recorded since the mid-1970s, wages are increasing faster than retail prices, and mortgage rates are close to record lows. However, the latest information from the Land Registry paints a more complicated picture. Although UK house prices are still rising, they grew by only 1.2% in the year to May 2019[1], and in London they fell by -4.4% over the same period[2], the biggest annual fall since the 2008/09 financial crisis.

Average dwellings graph

Source: Bloomberg

London has always led the UK residential property market, with the rest of the country following. However it should be noted that house prices in London rose at a much steeper rate than the rest of the UK between 2009 and 2016. At this current point in time, London may be feeling the effects of Brexit-related uncertainty which could be deterring buyers. Expressions of intent to relocate staff elsewhere in Europe, by a number of institutions, is unlikely to boost sentiment.

The Deputy Governor of the Bank of England reflected on the broader economy when he said, "it's an unusual period and we won't get that accurate a read on what's happening under all of this until we're through it"[3]. Stockpiling distorted economic activity in the first half of this year could continue to cloud the "true" underlying trends.

While the long-term impacts of the Brexit vote are hotly debated, the uncertainty is not helping people or companies make investment decisions. Clearly a decision point is coming on the 31st of October, but it remains unclear whether we will leave, stay, or if there will be another extension.

The residential property market in London is likely to remain in the doldrums. Elsewhere in the UK the effects may be felt slower, although with a number of manufacturing plant closures planned, other areas in the UK are likely to experience a similar decline in property prices. UK equities are more diversified, with a high proportion of international companies supported by the falling pound. The UK equity market has lagged other developed markets as overseas investors continue to shun the UK. A resolution to Brexit however, may see confidence return to the property market and see international investors return to the UK equity market. For now, we will have to wait and see.


[2] Ibid


This communication is provided for information purposes only. The information presented herein provides a general update on market conditions and is not intended and should not be construed as an offer, invitation, solicitation or recommendation to buy or sell any specific investment or participate in any investment (or other) strategy. The subject of the communication is not a regulated investment. Past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and you may not receive back the amount you originally invest. Although this document has been prepared on the basis of information we believe to be reliable, LGT Vestra LLP gives no representation or warranty in relation to the accuracy or completeness of the information presented herein. The information presented herein does not provide sufficient information on which to make an informed investment decision. No liability is accepted whatsoever by LGT Vestra LLP, employees and associated companies for any direct or consequential loss arising from this document.

LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority (FCA).