Brexit and political uncertainty still affecting London prime property markets

The political twists and turns of Brexit are causing activity to ebb and flow in the prime London property market, according to the latest residential review report.

The total potential spend by buyers registered in prime central and prime outer London markets is £51.5 billion, according to the report from real estate firm Knight Frank. The report also says that the number of new listings has dropped year on year by 21.7%.

Political uncertainty continues to have a tangible impact on activity, according to Tom Bill, head of London residential research at Knight Frank. He pointed out that while the overall number of exchanges was marginally higher in the first six months of 2019 compared to the same period last year, it was not a uniform trend over the period.

Transactions declined year on year in January and February, underlining the mood of uncertainty as the original Brexit deadline of 31 March approached without a political consensus on the way forward.

The first failed meaningful vote on Brexit took place on 15 January and between March and May, the number of exchanges increased compared to last year, which Bill says reflected how a greater degree of confidence returned as the March deadline was delayed and the prospect of a disorderly Brexit receded. Indeed the rise in May was 10.4%.

However, transaction levels fell marginally again in June, demonstrating how political uncertainty returned following the resignation of Theresa May at the end of May and as the Tory leadership election got underway.

‘The new prime minister has pledged to boost the UK economy, which should drive activity in property markets, all else being equal. Anticipating any short term impact on pricing from a stamp duty cut, as proposed by Boris Johnson, is less straightforward given the potentially distortive effect on supply and demand. However, such a move would reduce trading frictions and should therefore raise transactions and tax revenues in the long term,’ Bill explained.

While pent-up demand continues to build, supply remains constrained. Overall, the supply of new properties remains more subdued as vendors hesitate due to the political uncertainty. Indeed, new listings were 21.7% lower in the year to the second quarter of 2019 than the previous 12 months.

However, higher value markets continue to outperform for reasons that include the fact price growth was more modest than the wider market between 2009 and 2015. The number of exchanges above £10 million increased by 33% in the year to June 2019, compared to an equivalent 3% decline between £1 million and £2 million.