Brexit uncertainty dominating the prime property market in London
Brexit uncertainty is dominating the prime property market in London but despite this the residential sector performed reasonably well in the first quarter of 2019, with continued slowing in the rate of price falls, according to the latest research.
Across the prime property market values fell by just 0.3% in the first three months of the year, the smallest quarterly fall since the Brexit vote and meaning that the annual rate of price at 2.5% was down from a fall of 3.7% a year earlier.
The data from international real estate adviser Savills also show that average prices ended March down 11.9% from their 2014 peak level, while in central London they are 19.4% below that highpoint as at the end of 2018.
The outer prime London market has done best of all with prices down 0.2% quarter on quarter, down 2% year on year and some 8.3% below the peak of 2014.
‘Uncertainty aside, this leaves prime London looking relatively good value and some buyers, particularly those in the most expensive central postcodes, are sensing a market that could be at or close to its bottom,’ said Lucian Cook, head of UK residential research at Savills.
‘Good property that is appropriately priced has continued to trade, but it has required great pragmatism from buyers and sellers and a significant narrowing of the gap between the price expectations of those in the market,’ he added.
Almost half of Savills agents across London reported a narrowing of the gap between buyer and seller expectations over the past three months, despite mounting political and economic uncertainty. This is evidenced by the performance of different niche markets across the city, though any stability is fragile given the economic and political backdrop, the report points out.
Kensington, Notting Hill and Holland Park, locations often associated with European buyers, all saw values stabilise between January and March, while annual price falls averaged just 1%.
The £10 million-plus end of the central London market, where values average £2,750 per square foot, held steady in the first quarter of 2019, down 2.2% year on year and down 21.3% since peak and at a price point that appears to be attracting new buyer interest.
However, despite prices stabilising, Brexit uncertainty means many would-be buyers and sellers continue to sit on their hands. In the first three months of the year, new buyer registrations for properties over £1 million were up 36% in central London and 11% across the rest of the capital. But given the level of political uncertainty, this hasn’t translated into increased market activity, the research shows.
‘There is a sizeable, growing pool of demand developing amongst buyers adopting a wait and see approach until the outcome of Brexit negotiations becomes clearer,’ said Cook.
‘Whichever way the Brexit pendulum swings and whatever the fundamentals of demand that underpin the prime housing markets, it could be some time before we have a clear understanding of what lies ahead both politically and economically,’ he explained.
‘This demand could translate into an uptick in transactions once there’s clarity, but that is unlikely to be matched by price growth in the short term,’ he concluded.