Slower sales and reduced property market activity unlikely to pick up until after Brexit
The property market in the UK has seen fewer sales and a reduction in activity in 2018, mainly due to Brexit uncertainty and tax changes affecting buyers, according to a new analysis.
But the outlook is encouraging as there has been a noticeable increase in buyer interest with registrations and viewings both up on last year, says the outlook and review report from property agents Chestertons.
Looking back at 2018, London has suffered more than the rest of the county in the wake of tax increases while Brexit has had a greater impact due to the number of international buyers traditionally in the market.
However, overall in the third quarter of 2018 buyer registrations were up by 30% and viewings by 28% compared to 2017, suggesting that there was considerable pent up buyer demand towards the end of the year while prices in higher value locations were 17% lower than they were in the peak in 2014.
‘Buyers have remained price sensitive and prices in the more expensive locations, especially in central London, have experienced further decline this year,’ said Guy Gittins, London sales market managing director.
However, there are signs that the gap between vendor and purchaser expectations is narrowing as the rate of decline has slowed. We have even seen sought after properties attracting competitive bidding and, in some cases, exceeding asking prices in pockets of the capital,’ he pointed out.
For example, average house prices in Pimlico currently sit between £1,200 and £1,500 per square foot but the last property our Pimlico office sold achieved a record price of close to £1,700 per square foot.
‘The general market outlook for 2019 does, of course, depend heavily on the Brexit outcome. Recent developments notwithstanding, we are assuming that we will end up with a deal which will be somewhere between a hard and a soft Brexit,’ Gittins explained.
‘The sales market is unlikely to see any increase in transaction numbers before the Brexit negotiations are resolved. However, values in the prime central locations have fallen to levels which now represent good value compared to the market peak,’ he added.
Indeed, prices are already 17% below their peak level of June 2014 and buyers are beginning to sense that the bottom of the market is in sight but he believes that there is clear potential for the undoubted pent-up buyer demand to be released once the uncertainties gone.
But prices across Greater London are unlikely to see much growth in 2019. ‘However, neither should they suffer any dramatic decline, barring a major shock in the wider economy and while supply continues to lag behind demand. Prices in the prime locations may see some further slight reduction, but we anticipate they will rebound once the pent-up demand is released,’ said Gittins.
‘Areas that have the most optimistic outlook for the next 12 months are outside of prime central London where house prices could climb by 2%. Long term, we estimate that London prices are forecast to rise 10.4% by 2022, although prime central London is set for a more modest rise of 8%,’ he concluded.