London house-price index plunges to seven-year low

Bloomberg

A measure of London house prices fell to its lowest level since the height of the financial crisis as Brexit sent shock waves across the UK.
The index dropped to minus 46 in June from minus 35 the previous month, the Royal Institution of Chartered Surveyors (RICS) said on Thursday, citing a survey of real-estate agents. That’s the weakest reading since early 2009. All responses were received after the European Union referendum on June 23.
A separate report from Acadata Ltd. and LSL Property Services Plc showed home values in the capital were already being hurt ahead of the vote, with prices decreasing 1.4 percent in May, the biggest monthly fall since June 2011.
RICS’s survey provides the first insight into the impact the decision to leave the EU is having on the housing market. It shows nationwide demand falling to its lowest level since the middle of 2008, while the number of properties put up for sale plunged to a record low. A gauge of sales expectations for the next three months was at its weakest in 28 years.

‘Critical Influence’
“Even without the buildup to the vote and subsequent decision in favor of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year,” Simon Rubinsohn, RICS’s chief economist, said in a statement. “The data does suggest that the dip in activity will persist over the coming months, but the critical influence looking further ahead is how the economy performs in the wake of the uncertainty triggered by the vote to leave.”
The trade body said its national house-price measure declined to 16 in June from 19 in May. While that indicates overall prices were still increasing, it’s the lowest reading since January 2015.
RICS said a measure of near-term price expectations fell to minus 27, with all the 12 areas in England and Wales it tracks in negative territory. Its nationwide gauge of price expectations for the next year plunged to zero in June from 54. The survey was conducted between June 24 and last week.

‘Clearly Unnerved’
In their report, Acadata and LSL said values in England and Wales rose 0.6 percent in June from May to an average 293,444 pounds ($387,000), the first gain in four months. On an annual basis, value inflation slowed to 6 percent from 6.1 percent.
The drop seen in London in May, the most recent month with regional data, took the average price of a home in the capital to 589,435 pounds, with 21 of its 33 boroughs registering a fall, LSL and Acadata said. Hackney, Wandsworth and Hounslow posted the biggest declines, with values decreasing by more than 4 percent in all three areas.
The Brexit vote has “clearly unnerved many buyers and sellers, and it is evident that some are reevaluating what they do and/or are attempting to renegotiate the price,” they said.
The reports come amid growing expectations that the Bank of England will cut official borrowing costs on Thursday for the first time in more than seven years. 30 of 54 respondents in a recent survey see the benchmark interest rate falling, with the majority of those forecasting a quarter-point reduction to 0.25
percent.