As we start 2019 the London residential property market has continued to struggle in terms of demand and values.
Most agents have reported that buyers are generally not committing until after Brexit, perhaps exacerbated by Carney’s comments regarding how far the market will fall in a post Brexit world.
From discussions with agents outside London this buyer malaise is starting to have a marked impact across the Home Counties with few anticipating little or any changes in demand until Q3 this year.
In my opinion Carney’s comments of a steep fall in prices are unlikely after Brexit, mainly because we have been seeing these falls for over a year and the anticipation of change can often be worse than the effect of the change itself. However, it is essential that the government secure a Brexit deal next year or any recovery will also be put back.
When prices fall, they can often over-correct until a reason arises for the buying processes to restart. If we consider the 2008 falls, precipitated by the financial crisis, the Bank of England cutting interest rates reversed this trend and buyers returned and prices inflated again. I would hope the conclusion of Brexit, in whatever form, should precipitate greater buying activity and a strengthening of prices.
Whilst the above commentary refers to the general London market, the higher priced London properties have already fallen by around 20% since their 2015 peaks. These falls seem to be beginning to stabilise and buyers are seeing “value” for the first time since the early noughties. The braver buyers securing relatively good deals in this current market may see some reasonable capital appreciation over the next 5 years and this current period may, in the years to come, be seen as the trough. Notwithstanding this, unless the punitive stamp duty charges are amended, the top end of the London market will never return to high volume demand.
So whilst the outlook for the residential market is not ideal, prices did need to settle down after years of strong inflation and, as long as interest rates stay low then the falls should be manageable.
For further information about this article or any queries in relation to residential property please contact James Perris.