This article is more than 1 year old

This article is more than 1 year old

The UK housing market is at the weakest point since the global financial crisis a decade ago as Brexit uncertainty puts off buyers, according to a leading estate agent.

Savills, which sells and manages commercial and residential property around the world, said fewer houses were sold in the UK in the first half of 2019 than at any point since the first half of 2009.

The declines have been led by London, where prices have fallen after years of rapid inflation. The average price of London homes sold by Savills fell by 32%, to £2.1m, in the first half of 2019 compared with the previous year, as the company shifted towards less expensive homes to make up for a weakness in “prime properties” – those worth more than about £3m.

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Weakness in the UK was mirrored in international markets amid “political instability and slowing global economic growth”, Savills said. In Hong Kong, which has faced weeks of political protests, office investment volumes fell by 34% year-on-year in the period, while the broader Asia-Pacific region remained under the shadow of the trade war between the US and China.

“In Asia Pacific, the imposition of Sino/US trade tariffs has affected investment confidence,” Savills said in a statement to the stock market.

Savills had previously warned it expected profits to decline in 2019, before either the Brexit extension or the Hong Kong protests, disruptions to business in two of its key markets.

Mark Ridley, the chief executive of Savills, said: “In many markets, particularly the UK and Hong Kong, political and economic uncertainty has considerably reduced the volume of real estate trading activity in recent months, although occupier demand remains robust.

“Underlying demand for the secure income qualities of real estate remains high, but these macro uncertainties weigh on investor sentiment and make predictions in respect of near-term market activity difficult to determine with accuracy.”

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The company’s total revenues grew 16% year-on-year in the first half to £847m, in part because of growth in non-transactional operations such as facilities management and consultancy.

In the UK, both residential and commercial property sales volumes have been reduced by Brexit uncertainty since June 2016. While prices are still rising on average across the UK, the pace of growth has slowed. Average house prices in the UK increased by 1.2% in the year to May 2019, down from 1.5% in April 2019, the latest ONS figures show.

The uncertainty continued in the first half of the year after the government delayed the scheduled date of Brexit to 31 October, dampening the prospects of a short-term increase in demand for property.

The British commercial market, including retail properties, office space and warehousing, also declined. Savills’ transaction fee income fell by 7% year-on-year in the first half, “reflecting continued Brexit-related uncertainty”, Savills said. It comes at a time when the retail sector faces significant changes to its business model. The move to online purchases has diverted shoppers away from local high streets, resulting in a stream of store closures.

Savills saidits figures indicated commercial property investment activity in greater London was down by 31% year-on-year, while investment in markets outside London fell 33%.

Andrew Allen, the head of global investment research for real estate at Aberdeen Standard Investments, said the range of possible outcomes for investment in British property was “higher than people can remember”, mainly because of Brexit.

He said UK property remained attractive to investors from abroad, particularly as returns from financial assets such as bonds were declining. Financing costs have also fallen as major central banks cut interest rates.

“Despite all the challenges that we see, there is plenty of global capital that wants income,” Allen said.