Brexit uncertainty is the main reason the UK has seen fewer sales and a reduction in activity in 2018, with tax changes also cited as a contributing factor in a new report.
However, the outlook appears brighter in the coming months, according to the outlook and review report from property agents Chestertons, with noticeable increases in buyer interest and viewings. Indeed, both of these figures are up on last year.
Regionally, Brexit and tax increases have had the worst impact in London throughout 2018, due to the more international market. That said, buyer registrations grew by 30% in the third quarter of this year, and there were 28% more viewings than there were this time last year, suggesting that buyers who were previously holding off are now beginning to emerge.
‘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.
He highlights this by referring to the most recent sale from their Pimlico office, which sold for a record price of close to £1,700 per square foot, well above the average for the area, which is between £1,200 and £1,500 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.
It is clear that once the various uncertainties subside, there is significant potential for a surge in buyer demand to take hold. Indeed, there is evidence to suggest that buyers are already sensing that prices may be close to bottoming out, with prices already 17% below their peak level from June 2014.
That said, Greater London prices are expected to see only marginal growth in 2019, if at all. ‘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.