The lucrative prime London property sector is showing signs of life after seemingly slipping into a coma in the wake of the Brexit referendum in 2016.
A new Knight Frank report published on Friday shows wealthy buyers are increasingly ready to jump back into the market, based on hopes that uncertainties surrounding Brexit could soon subside.
“Although sales volumes have declined over the course of 2018, the number of new prospective buyers has risen in recent months and was 8% higher in November compared to January 2017. This divergence suggests pent-up demand is forming,” said Knight Frank.
“New demand for prime central London property continues to rise in relation to new supply… which may put upwards pressure on pricing once the current political uncertainty recedes,” the report said.
Prices for prime London homes and flats have dropped by an estimated 15% since 2014 as Brexit and targeted tax changes scared away buyers and convinced sellers to hold tight, according to a recent report from wealth management firm Coutts.
This trend – and a slowdown in interest from foreign investors — dragged down prices across London in 2018. The capital saw home prices drop 1.7% to an average of £474,000 ($602,000) in the 12 month period up to October, according to the latest data from the Office for National Statistics and real estate firm Savills.
Knight Frank recently released another report with data supporting this trend, showing that land value has cratered ever since the Brexit vote.
Even as expectations grow that the market could stabilise, experts aren’t forecasting a return to the heady days of double-digit price rises.
“The end of Brexit uncertainty – when it arrives – is likely to release some pent-up demand and see a rise in market activity and prices. But we believe that it will be some time before transaction volumes return to the levels seen in 2013,” said Mohammad Syed, Coutts’ head of asset management, in a recent written report.
Members of parliament are set to vote on prime minister Theresa May’s Brexit deal in January, though it’s widely expected that they will vote against the agreement, which could push the country towards a no-deal Brexit scenario in late March.
The government has been preparing for the possibility of a no-deal Brexit, which is forecast to be a worst-case scenario for the country, leading to a sharp slowdown in trade, along with factory closures and severe economic strains.
The UK’s central bank warned last month that in its worst-case Brexit scenario, the economy could shrink by about 8% within a year. That fall would be the worst the country has seen in nearly 100 years.
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