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Spotlight: Prime London Residential Markets – Autumn 2016

Following the Brexit vote, London’s prime residential markets will need to adapt and adjust to a number of challenges

In the three months since the EU referendum I have split my time between looking for clues as to what the public’s decision means for the housing market and trying to convince my wife that I will still be able to get (much needed) spare parts for my ageing but attractive Alfa Romeo.

It is rapidly becoming clear that the scale of the problem with my sporty Italian hatchback is likely to mean, wherever I source parts, it will be impossible for the supplier to keep up with demand. In a strange way this has helped me put the challenges facing the prime London housing markets into perspective.

The combination of high levels of stamp duty, a substantially less benign underlying tax environment for overseas owners and general uncertainty following the Brexit vote, indicates that 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.

This would bring prime London prices well below the long run trend of real house price growth. That is the kind of phrase which warms the heart of a residential property analyst. What it means for everyone else is that all things being equal it will leave capacity for renewed price growth at the end of that period.

The critical part of that phrase is “all things being equal”. What does it mean in practical terms? Well, it probably means that London remains an attractive place to invest in prime housing, with a tax environment that is not prohibitive to those looking to acquire residential real estate.

It also requires that London maintains its position as both a major world city and Europe’s financial centre.

The decision to leave the EU and the fiscal backdrop may chip away at this status. This may prevent a substantial bounce in values in 2019. But the fundamentals are unlikely to be undermined suggesting that even though the prime London markets will adapt and adjust, there will still be some life left in them in two or so years time.

If only the same could be said of my Alfa.

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