London's prime property market picks up despite Brexit uncertainty
“Increased interest from buyers who had put off a purchase in wake of the referendum”
The effects of Brexit on the London housing market have drawn out much longer than the immediate aftermath of the referendum, particularly for wealthy buyers in prime central areas. Since the referendum, transactions dropped by approximately 20%, and appear to be slowing even further, with the market for homes (>£2m) declining 18% in the year to April 2019.
While transaction figures show a continued slowdown in activity, property professionals are noticing a pickup. It suggests a turning point, even while Brexit still remains to be sorted.
The unpredictability and uncertainty that Brexit has brought to the UK economy has discouraged people from making the financial commitment to top-end London house purchases. Three years on, however, buyers are making contact again with estate agents – this time with bigger budgets. Buyers in the £1m to £5m range that were cautious are going ahead with purchases they had held off on in the wake of the referendum, feel as though the market has come down far enough for them to re-enter.
Despite a decrease in interest from wealthy buyers based in EU countries, Nigel Bedford, a senior partner at largemortgageloan.com, says that “There will always be that demand because of the inherent long-term stability of the UK and the very transparent ownership and tax positions”. Falling house prices and a lower GBP explain much of the demand from international buyers. Research by estate agent Hamptons International has shown that a £2m home now effectively costs 33% less.
Hamptons International has also reported that 58% of buyers in the first six months of 2018 were overseas based, a record high. Since then, however, the international share has dropped back to 44%, largely due to the capital restrictions from those in China / Hong Kong.
Another phenomenon accounting for the increased interest in the London housing market are the ultra-low interest rates. Banks are offering generous terms on fixed-rate deals and interest-only loans for wealthier purchases. Borrowers can now get private bank money for 2% all in.
The future of the London housing market is largely dependent on how Brexit comes to an end.