The widening gap between supply and demand in the prime London property market along with Brexit-linked economic uncertainty and the threat of higher inflation are likely to keep price growth lower this year.
The latest analysis suggests that prices will fall by 0.7% in the prime central London market by the end of 2017 with property price and type set to be critical differentiators but prices are forecast to rise by 1% in 2018.
The report from real estate firm Cluttons also suggests that as long as the Brexit negotiations stay in track property price rises should be around 2% or 3% between 2019 and 2021.
Cluttons forecasts that cumulative growth should reach 8.6% between now and the end of 2021 but this is substantially lower than the near 30% rise in values recorded across prime central London over the last five years.
There will be variations between locations. The firm forecasts that numerous places will see prices remain unchanged over 2017, most notably Westminster, St John’s Wood, Regent’s Park, Hampstead, Battersea, Clapham, Wandsworth, and the South Bank.
Others are likely to see some price growth, with South Kensington prices forecast to rise by 2.1% this year, Knightsbridge by 1.3%, and Chelsea by 1%. The City could see prices rise by 1.4%, Farringdon and Wimbledon by 1.8%, Richmond 1.3%, Dulwich 2.7% and East Dulwich 3.2%.
Locations likely to see prices fall in 2017 include Marylebone with a fall of 2.3%, Notting Hill down 1.9%, Kensington down 1.6%, Hyde Park down 1.3%, Nine Elms down 1.9%, Wapping and Mayfair down 0.8% and Holland Park down 1.4%.
The report explains that the threat of a supply surge is receding with anecdotal evidence suggesting that much of it is finding its way onto the rental market. However, rents are forecast to fall in many locations.
‘General apprehension around the stability of values at the top of the market has meant buyers have moved into a holding pattern while we work our way to the bottom of the current property cycle, further dampening the prospects of an immediate rebound in the performance of values for high end homes,’ the report says.
‘While we have noticed a surge in requirement from Gulf based investors looking to capitalise on sterling’s weakness and some developers’ willingness to offer deal sweetening discounts on bulk deals, especially off plan homes, this wall of cash from the Middle East is unlikely to emerge as the sole catalyst of the market’s turn around,’ it explains.
‘Despite notable interest from Middle East and Far Eastern buyers, we appear to be reaching a tipping point with sales slowing,’ it adds, concluding that overall, a prolonged uncertainty due to political environment in the UK, coupled with affordability issues, continues to stifling buying activity, especially in higher price brackets.
