After a turbulent 2016 that saw the UK vote for Bexit, how will the London property market take shape in the next 12 months? Experts across the capital have their say
Words: Fiona Brandhorst
If a week is a long time in politics, the housing market in 2016 was as turbulent as they come. First we had the hike in Stamp Duty for second homeowners in April adding 3% to each price band, sending the market into a spin before the ruling became law with record transactions and price rises. And then Brexit.
Developers and estates agents in London have been putting on a brave-yet-realistic face, with the future of the property market in the capital largely dependent on confidence. There are many reasons to believe that London’s place on the global stage will not be undermined, says JLL. London’s business powerhouse is as crucial to the EU as it is to the UK. Additionally, London has no true viable European competitor, especially in financial services, with London’s role in global markets alongside New York, Singapore, Hong Kong and Tokyo a vital consideration.
JLL is anticipating annual price growth of 0% in 2017, 1% in 2018 and 3% in 2019, before stronger growth and greater normality returns to the country, London and the Prime Central London (PCL) housing market from 2020.
Price growth is predicted to be quite muted during 2017 and 2018
Head of UK Research for JLL, Jon Neale, adds: ‘Price growth is predicted to be quite muted during 2017 and 2018, especially in higher priced locations, but with buyers poised to return once the waters are calmer, as we saw in 2009, we expect prices to ratchet up quickly before growing more steadily.’
An increase in transactions in the last quarter of 2016 has instilled hope that the London market is weathering the storm of both Brexit and Stamp Duty changes. Simon Tollit, Director of Central London Sales at United Kingdom Sotheby’s International Realty, comments: ‘It is anyone’s guess how the market will react to the proposed activation of Article 50.
‘What we do know is that whenever uncertainty rears its ugly head the market undoubtedly slows and prices become flat. That said, there are hotspots in the capital and Victoria will continue to be one to watch in 2017.’
What we do know is that whenever uncertainty rears its ugly head the market undoubtedly slows and prices become flat. That said, there are hotspots in the capital and Victoria will continue to be one to watch in 2017
Francis Burca, Sales Negotiator at Harrods Estates Chelsea adds that the EU referendum triggered a surge in enquiries across all of its offices from international buyers and investors looking to take advantage of the weaker pound. ‘It is my belief that this will continue in 2017, as the pound will only strengthen once there is more clarity in the UK’s direction.
‘Vendors in PCL are not lowering their asking price, as they are holding out for a stronger sale. We’ve also witnessed a rise in demand for lateral spaces and I believe this will continue in 2017 as London still has a magnetic pull and remains an attractive investment.’
Although the implications of Brexit will not be fully understood for some time to come, the PCL market is likely to remain a safe haven for investors’ money in the long term and therefore price growth of 8% is expected to return from 2019 onwards, following the best case scenario of zero growth in 2017/18, according to Strutt & Parker.
Charlie Willis, Head of Strutt & Parker’s London Residential Agency, adds: ‘The fall in sterling against certain currencies following Brexit, particularly the dollar and the Swiss Franc, has definitely been a major contributing factor to the increase in buyers we have seen from Europe and Asia since June 2016. For overseas buyers, this currency play instantly wipes out the formerly prohibitive cost of 15% Stamp Duty on the most expensive properties.’
The proposed Crossrail 2 line, Bakerloo extension and £344 million expansion to London City Airport are set to drive development and place making across this part of the capital. The London Mayor Sadiq Khan’s recent announcement that the Silvertown tunnel, DLR extension and a new cycle bridge between Rotherhithe and Canary Wharf will be built is further progress in helping to unlock east London.
There is no precedent for the current market and the Brexit vote makes forecasting more challenging than perhaps ever before
Nick Parr, partner Knight Frank Development Consultancy, says: ‘East London remains buoyant, yet the positive sentiment is struggling to be heard over the slowdown in prime central London. Infrastructure improvements continue to add value. Journey times to central London remain the most influential factor on house prices.’
‘There is no precedent for the current market and the Brexit vote makes forecasting more challenging than perhaps ever before,’ says Lucian Cook, Savills UK head of residential research. Savills’ forecasts for PCL are for no growth in the next two years then 8% in 2019, while in other prime London locations forecasts are for a drop of -1% in 2017 returning to 6% growth in 2019 as uncertainty clears.
Spicerhaart’s Paul Smith concludes: ‘It cannot be emphasised enough how much the residential property market is reliant on confidence, and with a market that is suffering from almost record low transactions levels, it is now more important than ever that clarity is provided. Our property market has in the past proved robust, and bounced back in terms of adversity.’