London’s prime property market is capable of overcoming any challenges posed by Brexit, and is in a stronger position than what many are currently suggesting, according to a new analysis.
The figures from real estate firm Knight Frank point to a 5% rise in the number of prospective buyers entering the market in 2018, both in prime central London areas and in prime outer regions. That said, the figures also show that this is yet to translate into growth of sales or prices. Indeed, sales were down 15% year on year in 2018, while prices fell by 4.4% on average.
Tom Bill, head of London residential research at Knight Frank, suggests that there was a clear impact on the prime London market caused by political uncertainty throughout 2018.
He points out that, in the early part of 2018, the higher transaction costs were beginning to be reflected by the inflation in asking prices, in what was considered a key indicator that the market was beginning to rally. Data from LonRes shows that sales in prime central London were in the 12 months up to March were up 7% on the previous 12 month period.
However, all of that reason for optimism had largely evaporated by December amid continued uncertainty surrounding the UK’s impending departure from the European Union in March, and 2018 ended with volumes down 15% year on year.
Meanwhile, prices followed suit, as the average property value decreased by a further 3.7% over the course of 2018.
‘Identifying individual factors affecting the performance of the prime London property market can be a complex task but the impact of political uncertainty was decisive during 2018,’ said Bill.
‘Economic sentiment indicators displayed a similar trend. The Lloyds business barometer began the year with a reading of 35% in January but had fallen to 17% by December. Similarly, the Deloitte CFO survey fell from a net reading of +1 in the second quarter to -30 in the third quarter of 2018,’ he pointed out.
‘However, there are underlying signs that pent-up demand and the conditions for a recovery in the prime London residential market are building. While the number of exchanges declined over 2018, the number of new prospective buyers registering rose by 5%,’ Bill explained.
‘Indeed, the ratio of new demand to new supply rose to 4.9 in the final quarter of 2018, the highest level in four years. Meanwhile, the average number of days between listing and a property going under offer fell 2% in 2018 compared to the previous year as more appropriately-priced properties went under offer more quickly,’ he added.
‘While it is unknown when the current level of political uncertainty will recede, the conditions for a recovery in the prime London property market appear to be taking shape,’ he concluded.