U.K. House Prices Stuck in a Brexit Rut With Growth Near Zero

(Bloomberg) -- U.K. house-price growth remained subdued last month as values in London and the southeast continued to fall, according to Nationwide Building Society.

June saw a year-on-year increase of just 0.5%, a seventh straight month below 1%. That compares with increases of around 2% a year earlier.

The uncertainty arising from Britain's departure from the European Union has weighed on the housing market for the past year, especially in London. Still, record employment and historically low interest rates are underpinning demand.

The lack of clarity about how Brexit will unfold will continue to weigh on the market, but it's also created a form of stasis. Potential sellers are holding back until there's clarity about what happens on the Oct. 31 deadline. Boris Johnson, the frontrunner in the race to be the next U.K. prime minister, has said he'll exit without a deal with the EU if needed.

What Bloomberg's Economists Say...

“Ironically, Brexit uncertainty may also be limiting the extent of downward pressure on prices. While demand for housing has slowed, so too has the supply of homes coming onto the market, as more households take a ‘wait and see' approach. The inflationary impulse from a lack of available properties appears to have prevented a more significant dent in prices.”

--Niraj Shah, economist
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Nationwide said housing trends will probably continue to mirror the broader economy. U.K. growth came in at a solid 0.5% in the first quarter, but that was partly due to a Brexit stockpiling effect that is expected to be unwound. The economy may stagnate this quarter, and the Bank of England said last month that downside risks have increased.

“While healthy labor market conditions and low borrowing costs will provide
underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months,” said Robert Gardner, Nationwide's chief economist.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Fergal O'Brien, Andrew Atkinson

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