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The Brexit vote is starting to hurt London’s property market—and its much loathed estate agents

By Eshe Nelson

The true impact of the Brexit vote will take months, if not years, to become clear. But it’s already putting a dent in one of the UK’s most robust industries—the London housing market.

Property prices in Britain’s capital have long risen at a much faster rate than in the rest of the country. Some see it as a sign of the city’s success, but many residents complain that it’s unaffordable for all but wealthy Russian oligarchs. At £472,000 ($621,000), the average London home is now worth 10 times the average annual earnings of city residents.

The uncertainty following Britain’s referendum on membership in the European Union has led to a slowdown in the London market, according to Foxtons, a chain of real estate agents infamous for their aggressive tactics. Property sales won’t recover before the end of the year, CEO Nic Budden said today (July 29) as the company reported a 42% drop in first-half profit (pdf).

Yesterday, Countrywide, one of the UK’s largest estate agents, warned that full-year earnings will fall as Brexit puts a damper on the housing market in London and surrounding areas. Pre-vote jitters pushed mortgage approvals in the UK down to a 13-month low last month.

Given the special (read: expensive) status of London’s housing market, it’s too early to tell if this is a short-term shock or the beginning of a longer-lasting slump. For one thing, Foxtons isn’t giving up its plan to expand to 100 branches across the city, from around 60 today, though it will slow down the pace of expansion.

Analysts at the Centre for Economics and Business Research released a report yesterday forecasting a slowdown for the London market, where house prices have grown at an average 10% annual pace over the past five years. Prices will rise by around 7% this year before falling by nearly 6% in 2017, the analysts predict. The last year-over-year decline in average London prices was way back in 2009.

“If the Brexit negotiations don’t go well, the London property market is probably first in the firing line because financial jobs could move out of the city,” said Laith Khalaf, a senior analyst at investment firm Hargreaves Lansdown.

However, there are a lot of factors that could keep London prices high. To name a few, Khalaf cites low mortgage rates as a result of rock-bottom central bank interest rates and the government’s Help to Buy subsidy program for homebuyers. Even more importantly, London’s chronic housing shortage is likely to make the capital a pricy place to live for the foreseeable future, regardless of Brexit.