A year after the UK voted to leave the European Union prime property prices in London have continued to soften, recording small falls both in central and outer prime locations over the past quarter.
The latest analysis from international property adviser Savills shows that average prime London values fell 0.9% in the second quarter and are down 5.3% year on year and 6.9% lower that the peak in the middle of 2014.
Ten years on from the credit crunch, this puts total gains at almost 30%, but still less than it was in 2014 when capital gains stood at 37%.
‘Ahead of the vote to leave the EU, there were signs of a market bottoming following the adjustment triggered by the December 2014 stamp duty reform, and some locations had started to show price growth, but increased political and economic uncertainty has weakened fragile buyer sentiment,’ said Lucian Cook, head of residential research at Savills.
The analysis points out that, as with the stamp duty effect, post referendum uncertainty is particularly impacting the most expensive and discretionary parts of the central London market.
Average prices in prime central London fell 1.3% in the past three months, to leave them down 6.8% year on year and 14.4 from their peak. This leaves 10 year price growth in the most expensive central postcodes below the prime London average at 23.4%.
Locations with a high proportion of buyers from the financial sector, whether domestic or European, such as Kensington and Notting Hill, Canary Wharf and parts of South and West London, have also seen small falls in the face of increased buyer caution.
These include locations that have seen the largest post downturn gains but prices in the prime South West and North East markets are still 35% up on their 2007 level.
Savills forecast from November 2016, anticipated that prime London values would fluctuate this year, but end on zero growth across the full year. The report says that increased levels of political and economic uncertainty make it less likely that year to date losses, which the firm puts at an average of -1.2% across prime London as a whole and -2.1% in prime central London, will be recovered in the short term.
‘Where vendors have realistic price expectations, which reflect these falls, sales are proceeding. But there is a lack of urgency in the market and vendors who need to sell may need to adjust their expectations further,’ Cook said.
‘It has been widely reported that the currency advantage is leading to an uptick in dollar denominated and international buyer activity. In our experience, the currency play is helping to underpin sales, by partially offsetting high stamp duty costs, but buyers still need the reassurance that they are buying the right property at the right price,’ he explained.
‘Stamp duty reform has reduced speculative buying, with the market now much more the preserve of needs-based buyers. However, prime London continues to be considered a relatively secure investment asset in a global context and this too is underpinning buying decisions for those taking a mid to long term view,’ he added.
