London prime property prices ‘to stall until 2019’

The latest report from Savills shows that prime property prices in central London will not return to growth until 2019.

London property
Prime property prices in central London are expected to have fallen over 2016 by 9 per cent by year's end and will not return to growth until 2019, according to a report from Savills.But the estate agents said that in the three years 2019–2021, anticipated price growth was 21 per cent among £4 million-plus properties in areas such as Mayfair, Knightsbridge, Chelsea and Belgravia.The report said that the top end of the market in London had been heavily impacted by changes to stamp duty, including April’s 3 per cent surcharge on second-home buyers, and by uncertainty surrounding the referendum vote to leave the European Union.Savills said this would lead to the fall in the value of the expensive properties, knocking some £360,000 from their value over the course of this year. The forecast surprised some analysts who had been expecting the prime market in London to pick up because of the tumbling value of sterling since the Brexit vote.But Savills said, “Post-referendum uncertainty has compounded the impact of successive tax rises on values in London’s prime housing market, and will delay the sector’s return to growth."

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Lucian Cook, head of UK residential research at Savills, added, “The current situation is reminiscent of the 2002-to-2004 post-bull-run period, when a less significant financial shock combined with an uncertain geopolitical backdrop. Prices then fell a total of 10 per cent. "We know the prime London markets have generally rebounded strongly after a period of adjustment. While the tax backdrop will continue to be factored into buying decisions, no other European city has the infrastructure to match London as a world city and a global financial centre and this should underpin a return to trend levels of growth."Further price adjustments are needed to make the market more fluid in London. Two further years of uncertainty, as the government’s crack negotiating unit tries to extricate the UK from the EU, are also likely to limit the prospect of any serious price growth over that period.” In the second tier of the prime outer London markets, where the average house price stands at £2 million, Savills is predicting price falls of 5 per cent this year, more than offsetting the 2.3 per cent rise recorded in 2015. A further fall of 1 per cent is forecast for 2017.However, by the end of 2021, total price growth is expected to be 15 per cent “reflecting mortgage-lending constraints and greater caution around financial sector job security”.

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