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London prime property market report

June 2016

In? Out? Up? Down? Buy? Sell? Homeowners are understandably confused by conflicting forecasts from both sides in the EU referendum debate as to how the outcome could affect house prices.

Some on the Remain side argue that the average UK home could lose up to 20% of its value in the event of Brexit, whilst the Leave campaigners have simply dismissed this as scaremongering. The truth is that the Super-Prime Central London market has already seen falls in demand, and therefore prices. Since the highs of 2nd quarter 2014 – when London’s prime property began to look overpriced, and the Chancellor’s intervention with Stamp Duty reforms – capital growth has been a rather shy beast. This especially affected the £5m+ market, even before the word ‘Brexit’ entered the English language! The exception was the sub £1.5m market in the lead up to the introduction of investors’ Stamp Duty on 31st March this year.

Some of our domestic clients have got on with their purchases because their lives dictated that they must. Indeed we have recently managed to secure properties at prices far more favourable than would have been possible in the two previous years. However, in the meantime, our European and other overseas buyers have held back, in anticipation of the referendum decision.

London is one of the greatest capital cities in the world. Whichever way we vote, it is certainly not going to fall off the map. As well as its strong financial centre, London is coveted for its culture and the respected status it awards homeowners from abroad.

After the referendum, the key issue for potential buyers in the Prime and Super-Prime Central London markets will be he short-term aftermath. Economists can only guess the probable impact of a ‘Brexit’ but the general consensus is that one likely immediate effect would be further falls in the value of sterling. This alone will provide good buying opportunities for overseas purchasers. Indeed, we have been in conversation in the last two weeks with a number of overseas buyers in anticipation of just that.

Another immediate impact of an ‘out’ vote would be uncertainty in our financial markets, as well as our service and manufacturing industries. Until there is more clarity, this is likely to undermine confidence and demand in all markets, potentially creating more downward pressure on property prices. This would indicate that after an ‘out’ vote buying opportunities would be very good.
Given time, a cheap pound would not only incentivise overseas buyers to take advantage, but European buyers could potentially wish to hedge against the potential demise of the whole EU. This could, in the longer term, buoy London property prices up again. This would indicate a window of opportunity over the next year or so.

What if we stay in?

George Osborne’s Stamp Duty reforms, and the run-up to the referendum, have significantly dampened the market, but we believe that a ‘remain’ vote would revive confidence quite swiftly. However, given the expense of buying a property in the UK, additional recent legislation affecting investors and overseas buyers, and buyers having become less ‘elastic’ about prices since the historic highs of 2nd quarter 2014, we believe that capital growth will be less bullish than over the past eight years.

Whatever the outcome, we remain committed to securing both on-market and some otherwise unsourceable off-market properties through our extensive network of contacts, and also to negotiating hard on our clients’ behalf.

In the 21 years since we set up London Property Search we have only ever worked with up to four clients at any one time. This ensures that each client receives unparalleled levels of service, and prevents any conflict of interest when working for different clients seeking similar properties at the same time.

Sarah Van der Noot – Managing Director, London Property Search.

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