Sales in London’s prime property market are weakening as Brexit approaches, however pent-up demand is building, according to the latest market analysis.
Prices have also been inconsistent over the course of 2018 with average prices down by 2.9% in the year to September, which compared to a more modest decline of 0.7% in January.
The data from the Knight Frank report shows that while there has been a 9% decrease in sales in the 12 months to August 2018 in central London there has been a 31% rise in prospective buyers in central and outer London.
And there has been a 12.5% increase in the number of new prospective buyers in the third quarter of 2018 compared to the same quarter of 2017.
‘Uncertainty surrounding the outcome of Brexit talks has curbed sales volumes,’ said Tom Bill, head of London residential real estate research at Knight Frank.
He explained that the fall in sales in the last 12 months is in contrast to a rise in the 12 months to March 2018 when the market had begun to recover following the European Union referendum.
However, as Brexit approaches and the negotiations become more urgent, volumes have receded. There has been a similar downwards trend in the number of sales across Greater London since last year.
‘This somewhat changeable flow of data has been a feature of the prime London property market in recent years. As transaction volumes or pricing begin to stabilise, external events put any recovery on hold. In recent years, these external events have included two general elections, the EU referendum and tax changes,’ Bill pointed out.
‘However, none of this should obscure the fact that underlying demand remains robust as the Brexit talks near their conclusion. Some 12.5% more new prospective buyers registered in the third quarter of this year than the same period in 2017,’ he said.
‘Meanwhile, the total number of prospective buyers was up by a fifth over the same period. Indeed, the number of prospective buyers in both prime central and prime outer London increased by 31% between January 2016 and August this year,’ he added.
The data also shows that the number of new listings fell by 10% in the third quarter of 2018 compared to the same period last year. Meanwhile, the number of properties valued for listing fell 6% over the same period. ‘Rising demand and falling supply suggests pent-up demand is forming,’ said Bill.
The other impact of political uncertainty has been on pricing. In a similar way to transaction volumes, pricing trends have also been inconsistent over the course of 2018. ‘In addition to the political backdrop, price declines were exacerbated earlier this year by an increase in supply as more landlords respond to tax changes by selling or listing their property for sale, though the number of listings has dipped in recent months ahead of Brexit,’ Bill explained.
‘Although Brexit uncertainty is intensifying, talks are due to reach some form of resolution by the end of this year, which suggests current levels of uncertainty will be short lived. Furthermore, the fact prices have now adjusted for higher rates of stamp duty suggests volumes will strengthen once the political uncertainty recedes,’ he pointed out.
‘Meanwhile, in a positive signal for demand in the prime London property market beyond Brexit, the take-up of new office space in central London has been rising. The 12 month rolling total rose to 14.6 million square feet in the second quarter of 2018, which was 15% higher than 12 months ago,’ he added.
