The U.K.’s upcoming vote on whether to stick with the European Union (EU) or go it alone could hit the housing market, particularly in super-expensive London, real estate experts are warning.
In its earnings report this month, Foxtons, a British estate agency, said sales of London residential properties could be impacted by political and economic uncertainty in the run-up to the referendum on June 23.
Meanwhile, the Royal Institution of Chartered Surveyors said the referendum could bring “a degree of uncertainty for buyers that may negatively affect some elements of the (U.K.-wide) market.”
“While survey indicators suggest that investment should continue to rise in the coming six months, we are likely to see business confidence weaken as we approach the referendum date,” it added in a report in March.
The vote is set to be close, as the two rival camps lay out their arguments over where the U.K should remain in the EU. The latest poll by YouGov indicates that 40 percent of the U.K. electorate would vote to remain in the union and 37 percent would vote to leave, with the remainder undecided or not planning to vote.
London has long been a global hub for property investment, benefiting both from the city’s status as a global financial hub and a perception that its real estate is a “safe haven” investment.
At the end of last year, Knight Frank forecast that 4,364 ultra-high-net-worth individuals (those worth more than $30 excluding their primary residence) would live in London in 2016 — the highest population of any city in the world.
However, should the “no” vote win, a reduction in London’s standing as a major financial city could impact the property market, Foxtons warned on Tuesday.
Shares in U.K. house-builders have fallen in the build-up to the vote.FTSE 100-listed Barratt Developments and Berkeley Group have declined by around 7.5 percent this month, for instance.
Demand for London properties began weakening last year, due to increases in the taxes levied on buyers of properties worth more than £1.1 million ($1.6 million), second houses and buy-to-let homes.
Foxtons posted a dip in profit for 2015 on Tuesday, as the decline in the high-end London property market weighed. Its pretax profit fell 2.6 percent to £41.0 million.
Among the most-affected boroughs was Marylebone — home of the fictional detective, Sherlock Homes — where rental prices declined by 4.1 percent in the three months to February 2016 and sales prices fell by 1.1 percent, according to Knight Frank.
The luxury real estate agency said that rental prices declined by an average of 0.9 percent between December and February in so-called prime central London, while sales prices remained flat. This area contains some of the world’s highest-valued properties in locales like Kensington, Knightsbridge, Belgravia and Chelsea.
By comparison, rental prices fell by only 0.4 percent in prime outer London — boroughs like Battersea and Richmond in the south and Hampstead in the north — in the same period, while sales prices rose by 0.4 percent.