Safe as Houses? The Impact of the Brexit Vote on London's Role as a Property Safe Haven - Arbuthnott, Emily; Stanford University, Department of Economics; Piazzesi, Monika (Stanford University, Department of Economics, Honors Theses, 2020)
London, like many global cities, has benefited from and been troubled by high levels of foreign investment in its housing market. On the one hand, its reputation as a ‘safe haven’ has helped drive the economy of the South East of the UK. However, on the other hand the increased property prices resulting from high overseas demand have exacerbated the affordability crisis in the capital. With the unexpected vote to leave the EU in June 2016, how has London’s role as a property safe haven changed? Using a synthetic control methodology, this paper estimates a counterfactual London house price index to show how house prices would have evolved in the absence of the Brexit vote. The results show that the vote to leave the EU reduced house prices across London, leaving them 22.7% lower by the third quarter of 2019 than under the counterfactual. Subsequent individual synthetic controls for sub-areas of London receiving high, medium, and low levels of foreign investment in housing also demonstrate a large negative hit to prices measured against their synthetic counterfactuals. However only the results for the low and medium investment groups are significant, which could indicate some persistence of the safe haven role in high investment London.
Arbuthnott, Emily. (2020). Safe as Houses? The Impact of the Brexit Vote on London's Role as a Property Safe Haven. Stanford Digital Repository. Available at: https://purl.stanford.edu/vk830yw5208
emily.arbuthnott@gmail.com
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Keywords: thesis; Department of Economics; house prices; HPI; Brexit; synthetic control; safe haven