Central London property market outlook linked to Brexit deal, says new report
The central London property market was subdued in 2018 but prices started to make a recovery after bottoming out in 2017 and the outlook for 2019 is more positive but dependant on Brexit.
While sellers have now come to terms with market conditions and are accepting of more realistic prices, political uncertainty and concerns over a no deal Brexit have had an impact with sales down significantly in the final quarter of 2018.
The analysis from Winkworth also points out that demand from buyers is still there with many actively looking to move but low stock and market concerns are causing people to hold back.
The firm has seen more hesitancy from foreign buyers over the course of 2018, but with the good current exchange rate, many Europeans are still seeing value in purchasing property in central London.
But, as political turmoil continues to dominate the headlines, the firm expects the first quarter of 2019 to be subdued but with a clearer outlook for the UK on Brexit by the end of March the outlook after that is more positive for the central London property market.
In line with the general market, prices in the fourth quarter of 2018 were some 18% below their peak at the end of 2014 and the report points out that this was when higher stamp duty tax was introduced, resulting in a drop in prices as home movers were put off more expensive homes with higher tax bills.
On a quarterly basis, the average price per square foot increased by 3%, up from £1,201 in the third quarter of 2018 and this figure has remained fairly static for the entire year after a sharp drop to its lowest level in the third quarter of 2017.
The report suggests that this increase may have been due to a high calibre of properties being sold throughout 2018 and the year experienced small increases in every quarter, potentially signalling a return to stability.
In terms of asking prices achieved, this has also remained largely flat for the year and finished at 92%. Although 6% below the peak of 2014, this shows how attitudes towards the central London market have changed. The report explains that sellers have now come to terms with the lower property values of today’s market and are becoming more inclined to negotiate and accept deals.
Sales have remained largely unchanged for a prolonged period since the fourth quarter of 2016, and this steady line represents a base level of needs based buyers who will always be in the market. Before this transactions fluctuated for a number of years reflecting their tendency to be the first affected when confidence in the market changes.
It points out that changes to stamp duty, both in 2014 and 2016, have significantly impacted market activity, as has uncertainty immediately following the European Union referendum and in the latter part of 2018, when negotiations were coming to a head.
Indeed, when transactions were at their lowest level in the third quarter of 2016 following the referendum, they sat 20% below the fourth quarter of 2018 and the report warns that with ongoing political issues surrounding Brexit still showing no signs of resolve, this could signify another weak period in the first few months of 2019.
‘We felt that 2018 ended on a more positive note and, whilst activity and prices are still below peak levels, the market has now levelled out. With a steady market comes improved confidence which should feed through to an increase in activity later this year,’ said Dominic Agace, Winkworth chief executive officer.
‘We were pleased to see the average price per square foot increase in 2018, suggesting to us that the market has bottomed out and this seems to have led to an increase in new applicant registrations as more people are actively searching for a new home. And, with 11 applicants for every new instruction, sellers should be confident that with the right agent, marketing and price, their property will sell,’ he explained.
‘As we look ahead, we are expecting much of the same for the beginning of the year. Then, as we gain further clarity on Brexit and dependent on whether we leave with a deal, we should start to see an uptick in activity. Although we don’t expect much in terms of price change this year, we should see some more motivated sellers later on so, while the immediate outlook remains a little subdued, we remain optimistic for a more positive end to the year,’ he added.