Baby boomers will remember where they were when they heard that Kennedy had been shot, or where they watched (or listened to) England win the World Cup in 1966. For younger generations the Brexit referendum on June 23, 2016 is one of those moments. It felt big. And it was, particularly for London.
It signalled the end of an era for the capital’s property market, which had seen a decade of rocketing house price growth.
From 2006 to 2016 London house prices had increased by 92 per cent (despite the 2008 crash), against a national average of 29 per cent. There was the excitement of the London Olympics while the Shard, the Walkie-Talkie and the Cheesegrater all rose up to change the city’s skyline.
The 10 years that followed saw significant price falls in the most desirable central neighbourhoods, sluggish sales in leafy London villages, and a dramatic decline of new-build homes for first-time buyers and social tenants.
From 2016 to the first quarter of 2026 values in the capital rose just nine per cent, versus a national average of 40 per cent. London had lost its shine.
“You will struggle to find a period of greater disruption to the housing and development markets”
Lucian Cook, head of residential research for Savills
Despite the slowdown, home ownership is more inaccessible than ever with the mid-to late-2020s characterised by stark housing inequity. House prices are 12 times earnings, the average deposit for a first-time buyer in London is close to £150,000, a third of children live in poverty after housing costs and record numbers of people are housed in unsuitable temporary accommodation.
How much of this is really down to Brexit?
New research by Savills shows a sharp decline in the annual house price growth in London immediately after the referendum. The average house price had risen 15 per cent in the year to March 2016, but fell 3 per cent in the 12 months to May 2019.
“The political turmoil before and after the vote was a drag on buyer confidence. This was most acute in London as a cosmopolitan capital city,” says Lucian Cook, head of residential research for Savills.
Wannabe buyers and property investors adopted a “wait and see” approach and people were worried about their jobs — particularly in the City — which dampened sales activity.
“There was a period of stagnation between 2017 and 2019 as Theresa May’s government remained in a precarious position,” says Tom Bill of Knight Frank. It created a drag on demand too.
“Brexit increased political and economic uncertainty that made buyers press pause, but it also altered the trajectory of the London housing market,” explains Tony Mulhall of RICS.
“London is a very international market at all price points and all ages with a range of cohorts. There will have been people renting on the verge of deciding whether to buy and how long to stay for before returning to their home country or elsewhere. Brexit may have expedited their decision to leave,” he says. Brexit also disrupted supply chains and the labour market, leading to a shortage in construction workers. By 2018 the number of new homes started in London began the downward spiral that we see today.
A series of unfortunate events
Jennet Siebrits, economist at Ripley, describes Brexit as a slow puncture. “It is difficult to ascertain the true and isolated effects of Brexit because of what came next,” she argues.
There were signs of a mini recovery when Boris Johnson won the General Election in December 2019, promising to get the deal done.
But this was short lived. When the pandemic hit in March the property sector closed for six weeks and even when the race for space took off, boosted by an emergency stamp duty holiday, the swell of sales and spike in prices largely bypassed inner London.
Although there was a lift in sales activity on the edge of the capital and a flight to family-sized homes with gardens, this was dwarfed by the move out. London has been the worst performing UK region since the pandemic in terms of house price growth and there have been three separate periods of house price falls across the capital over the past 10 years compared to one dip nationally.
“It is convenient to blame Brexit. It hasn’t helped but it certainly wasn’t the total disaster that was forecast. Covid, the expensive emergency furlough package, inflation, interest rate rises and the cost-of-living crisis were far more damaging,” says Siebrits.
The Grenfell Tower tragedy in June 2017 changed demand for flats, too, that had previously powered the London market. It forced councils and housing associations to re-appraise cladding and, in many cases, invest to meet fire safety standards, diverting funds away from increasing social housing stock. Grenfell triggered a raft of new safety reforms that would slow the delivery of new homes further.
This perception shift, and extortionate hikes in service charges, has turned first-time buyers off new-build, high-rise blocks, and consequently some developers stopped building new homes, fearful they would not be able to sell them.
Slowdown was always coming
The ferocious recovery in house prices after the global financial crisis (GFC) meant a correction was inevitable. “Very strong house price growth had dislocated London from the rest of the UK, leaving the capital exposed to the uncertainty created by Brexit,” says Cook.
The post-GFC pile-on came because of comparatively low property prices but was energised by a series of government actions. The Treasury embarked upon a programme of quantitative easing, printing more money to help prop up the banks, encourage spending, while slashing interest rates to historic lows. Cash buyers and investors swooped in, driving the recovery, with the value of a house leaping by 20.6 per cent in the year to August 2014.
If you already owned your first home, this price spike propelled you up the property ladder. Jon Byers, founder of Anderson Rose, sums it up.
“In 2005 I sold a one-bedroom apartment on the Thames by Tower Bridge for £600,000. It sold in 2016 for £1,350,000. If it came to market today, it would sell for £800,000,” he says.
In this short period of time, home ownership in London was lost to future generations. “Values rise quickly but fall slowly,” says Mulhall.
The Government took steps to cool the heated London market, trying to prevent the boom and bust of the property cycle, cranking up taxes for very wealthy overseas buyers as well as second homeowners and landlords. They wanted to increase the tax haul but also reduce competition for first-time buyers.
George Osborne’s stamp duty overhaul in 2014 made the tax cheaper for 98 per cent of home buyers.
However, prices were by this point so decoupled from income that the transaction tax acts as a barrier to buying and has disincentivised downsizers from freeing up family-sized homes.
The plight of the tenant
For Siebrits, government policy had a greater impact even than the global pandemic and yet in the raft of measures, homebuilding and the provision of rental accommodation has been neglected.
In the immediate wake of the Brexit vote, rents fell as international tenants left and fell again during the pandemic as young Londoners returned to the family home. However, the bounce-back when workers returned to the office was startling.
Over the past 10 years, in total, rents have risen 42 per cent, with the biggest rise coming in the past half decade.
In tandem with this, increased regulation to protect the tenant in the form of the Renters’ Rights Act and the heavy taxation burden on small landlords means more rental homes were put up for sale, reducing the number of rental homes for tenants, social tenants and those in need of temporary accommodation.
Hotspots bucking the trend
Over the past 20 years London has splintered into a patchwork of micro markets with a stark gap in demand between inner and outer zones. This has become more pronounced since Brexit as confidence in central London cooled and buyers edged outwards to find better value for money.
While house prices in Kensington and Chelsea rose 131 per cent in the 10 years before Brexit and fell 12 per cent in the decade that followed, boroughs such as Waltham Forest saw increases of 104 per cent and 24 per cent.
This was a result of price rises in Hackney pushing young families out towards Walthamstow and Woodford. Even over the past 12 months, the average house price in the borough has risen by £20,000.
The best performing boroughs by house price growth since the Brexit vote
Barking & Dagenham |
32% |
Redbridge |
31% |
Havering |
31% |
Bexley |
26% |
Sutton |
24% |
London is still London
Brexit was the first in a quick-fire series of disruptions to a London housing market that was already stuck and “malfunctioning”, says Mulhall.
A turbulent decade followed with six prime ministers, two major wars, three spikes in inflation, 25 changes to the bank base rate (which informs interest rates) and three national lockdowns.
“You will struggle to find a period of greater disruption to the housing and development markets,” says Cook.
London now has the double whammy of a perception image, not helped by Brexit, and high housing costs. Graduates are choosing other cities, such as Manchester, to start their careers because they can afford to be there while international workers are hesitant.
According to a recent Centre for London report, businesses say the unaffordability of housing is strangling growth, investment and talent.
However, we have also seen the arrival and completion of projects which are changing the capital for the good. The Elizabeth line has opened the financial districts in the east to those living out west and vice versa. The iconic Battersea Power Station is a bustling new neighbourhood while the areas of Wembley and Tottenham are starting to ready themselves to host Euro 2028.
“London has been at the sharp end of a series of unique events but its access to Europe, the language, the cultural offering, leading leisure and retail, the time zone and education all mean London is still London and it will be prove to be resilient over the next decade,” Cook adds.
