Savills plc

10/01/2019 | Press release | Distributed by Public on 10/01/2019 03:18

Prime central London bottoms out, but uncertainty holds back the bounce

The extent of price falls is now converging across all price bands, size or type of property, which suggests that pricing fully reflects current market conditions and risks, Savills says.

Across the UK capital's most exclusive central postcodes, where properties average £4.4 million or £1,750psf, price falls slowed to an average of just -3.0% year on year, according to the firm's quarterly index. This leaves values on average -13.6% below their pre 2016 referendum level, and a total -20.4% below the market peak just over five years ago.

For a US dollar buyer this equates to an effective price adjustment of around 42%, making London property look increasingly good value for international buyers.

'This broad price correction across prime central London is comparable with falls seen post GFC and in the downturns of the early 80s and early 90s, suggesting the market is now close to a full re-pricing,' said Lucian Cook, Savills head of residential research.

Uncertainty remains far the biggest factor in the market holding back demand, Savills says. Over two-thirds (68%) of the firm's London agents name Brexit as the biggest constraint on the market, with a quarter (23%) citing a lack of stock as sellers hold back. The spectre of an election is cited by 94% of agents as a concern to buyers and sellers alike.

'We expect buyer and seller caution to prevail through the remainder of the year as negotiations with the EU continue. The prospect of a general election only adds to this, though we don't envisage further significant price falls over this period, given the extent to which values have already adjusted and the size of swing in voting intentions required for there to be a hard left majority government and associated shift in policy environment.

'There's a growing pool of domestic and international money waiting to exploit a perceived buying opportunity, subject to getting more clarity on what lies ahead politically and economically. Deal or no deal Brexit, a bottoming out in the value of sterling should act as the trigger to unlock pent up demand.'

Q3 2019

Prime Central London

Quarterly growth

-0.3%

Annual growth

-3.0%

9 months to Sep-19

-1.8%

Since EU referendum

-13.6%

Since 2014 peak

-20.4%

Since 07 peak

11.6%

Source: Savills prime London index Q3 2019

The more domestic outer prime London markets have not escaped the effects of Brexit angst, albeit values fell just -0.9% over the past year to leave them down -9.8% since the referendum