Pent up demand could see boost to London prime property market post Brexit
The prime property market in London is set to get a boost once Brexit is sorted with the number of buyers looking for homes rising, according to a new analysis.
The number of new prospective buyers registering in prime central and prime outer London increased by 11.3% in the year to March 2019 compared to the previous 12 month period, the report from real estate firm Knight Frank shows,
Meanwhile, the number of offers made rose by 14.3% over the same period and there was a 12.5% decline in new listings across prime London markets.
As a result of these diverging trends, the ratio of new buyers to new listings in prime central and prime outer London rose to 9.1 in March, the highest figure Knight Frank has ever recorded.
‘Not only are there more new buyers compared to a year ago, but those buyers are each making more offers, increasing pressure on the demand side. While demand has grown, the supply of new properties has not kept pace,’ said tom Bill, head of London residential research at Knight Frank.
‘Vendors have acted in a more cautious manner against the backdrop of Brexit and the number of new listings declined 12.5% in the year to March across prime London markets. Given this level of pent-up demand we would expect a material rise in trading volumes should the current political deadlock be broken,’ he explained.
‘Any political resolution would lead to an initial period when demand outstrips supply, which may also provide upwards pressure on pricing. Following this initial period, new property listings are likely to rise, which would lead to greater equilibrium between supply and demand,’ Bill pointed out.
‘Any impact on pricing is therefore likely to be short lived. In the longer term, a more prolonged period of political or economic stability should see house price inflation return in prime London markets,’ he added.
He also pointed out that there is clear evidence that a number of buyers have manoeuvred themselves into a position that enables them to act once the current impasse has been broken, something that could happen at short notice.
The report explains that currently politicians have until 31 October to agree a Brexit deal that can be signed off by the European Union and says that while on the one hand, prolonged political uncertainty may curb activity across UK residential property markets.
On the other, the length of the latest extension may diminish the threat of a disorderly exit from the EU, which has always been the primary risk for property markets. The EU initially considered a longer delay and if buyers and sellers believe an established pattern is forming for further extensions, there may be a stronger inclination to trade.
It adds that the pound largely shrugged off the news of the latest extension and despite the political uncertainty, the economic news remains largely positive. The latest GDP figures for the UK, which showed 0.3% growth in the three months to February, were better than expected, while wage growth and employment levels remain healthy.