The prime property market in London is in a stronger position than it appears to be on the surface and is in a position to recover once Brexit is sorted, according to a new analysis.
The figures show that there is still no growth in terms of sales and prices. Sales were down by 15% year on year in 2018 and prices down 4.4%.
But the data from the London residential Spring review from real estate firm Knight Frank also shows that there was a 5% rise in the number of new prospective buyers during 2018 in both prime central and prime outer London.
Tom Bill, head of London residential research at Knight Frank, pointed out that the influence of political uncertainty on the prime London property market grew markedly over the course of 2018.
He explained that in the first half of the year there were signs the market was beginning to rally as asking prices adjusted more fully to reflect higher transaction costs. Sales in prime central London were 7% higher in the year to March than the previous 12 month period, LonRes data showed.
However by December, with Brexit uncertainty persisting ahead of the UK’s planned departure from the European Union in March 2019, volumes were down by 15% year on year.
Pricing behaved in a similar way. While the annual decline recorded in prime central London at the beginning of last year was 0.7%, by December the decrease had deepened to 4.4%.
‘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.