According to a new analysis from independent property buying agency Black Bric, the sub-£2 million price bracket will continue to attract investors due to its favourable yields, good liquidity, and domestic demand.
But the firm’s managing director Camilla Dell predicts that the same can't be said for the prime property market in London and the new build outer prime markets.
‘We expect the section of the market dominated by domestic buyers and those working in the financial services sector, predominantly £2million to £5 million but also up to the £12million to £15 million range, to potentially face some pressure linked to Brexit concerns,’ said Dell.
‘We do not expect the wholesale flight of financial services firms away from London, but it is likely that they will lose their passporting rights, or their ability to sell financial services across the EU if the UK does leave, triggering the departure of some financial services capacity to Dublin or the continent,’ she explained.
‘However, even relatively low numbers of bankers leaving areas such as South Kensington or Notting Hill where Europeans, in particular, tend to be concentrated could have a significant effect on local markets over the next couple of years,’ she added.
Black Brick also expects the new-build outer prime market to suffer most from continuing uncertainty, having already experienced a lull period before the referendum vote. ‘The stock market has already heavily bid down builders linked to this part of the market, which is suffering from significant oversupply and the disappearance of the foreign investors who had supported it in recent years,’ said Dell.
‘Areas such as Nine Elms in Vauxhall and Earls Court in West London are particularly vulnerable due to oversupply of expensive properties aimed at the overseas investor. However, there are a handful of stand out developments, such as Television Centre, that we believe are likely to continue to prove popular, and there will certainly be bargains to be had, particularly on the secondary market,’ she pointed out.
On the other hand, Black Brick expects the super prime market to be the least negatively affected, with the collapse of the sterling meaning that dollar buyers are actually factoring in a 12.5% increase in their purchasing power since before the referendum.
‘For the global elite buying properties at £15 million to £20 million or above, purchases tend to be about lifestyle choices, rather than business decisions, or are to diversify extremely large portfolios. Indeed, we are still seeing transactions continue. Brexit did not feature in conversations with clients in this part of the market before the referendum, and it is unlikely to be much of a factor now it is underway,’ Dell added.
Meanwhile, London’s new Deputy Mayor for Housing James Murray has said there will be meeting with major developers and the G15, the organisation that represents London's 15 largest housing associations, in City Hall next week to offer the Mayor's support to them in continuing to bring forward new developments across the capital.
Aims include securing a substantial affordable housing settlement to underpin the delivery of new housing, and allowing London to retain a full suite of property taxes and accelerating new planning rules to support new build to rent developments and to give developers clarity and certainty on affordable housing requirements, whilst also calling for greater planning autonomy for London.
‘Last week's European Union referendum result was not the outcome we wanted, but the fallout underscores how vital it is we do everything possible to stimulate and support the housing industry,’ said Murray.
‘There is no doubt that the vote has already caused uncertainty that will make it harder to fix the housing crisis, but our message to developers, housing associations and local authorities is that we will do all we can to give you the support and certainty you need to get through these difficult times,’ he added.
