by Tom Bill
Residential sales activity in prime central London was stronger this August than last year, though remained relatively subdued due in part to the seasonal summer lull.
However, there are grounds for cautious optimism that activity will intensify over the next few months, as recent stamp duty increases and, to a lesser extent, the vote to leave the European Union continue to act as catalysts for overdue price adjustments.
While there remains a high level of speculation over the impact of Brexit on the prime London property market, it remains too early to discern its likely long term impact.
As with the broader economy, any profound change in performance will only become clearer over the next year or two, depending on the outcome of a protracted period of negotiations between the EU and the UK.
While Brexit has added to a backdrop of political and economic uncertainty, it has also acted as an incentive for action in the two months since the vote. Buyers denominated in overseas currencies are benefitting from an effective discount of more than 10% since the start of the year due to the depreciation of Sterling.
Meanwhile, Brexit has been the trigger for some vendors to reduce asking prices to levels that take higher rates of stamp duty and the new economic and political climate into consideration. Prices in prime central London fell -1.8% in the year to August, the steepest decline since October 2009.
There remain differences across the region, with the largest annual decline of -8.9% in Chelsea, compared to positive growth of 0.7% in Mayfair and smaller declines of -0.9% in Marylebone and -0.8% in Belgravia. Meanwhile, the recent declines in Knightsbridge appear to be bottoming out as asking prices align with higher expectations.
Despite the summer lull, leading indicators of activity remain strong. In the eight weeks following the referendum, the number of new prospective buyers rose 22.1% compared with the same period in 2015, as figure 2 shows. The number of properties under offer rose 19%, while viewing levels increased by almost half. It is still early for firm conclusions of future market moves following the EU referendum, however the worst of the initial forecasts appear to have been avoided to date.
The tentative improvement in some demand indicators provide grounds to believe the prime central London market is set for at least a modest recovery in trading volumes, whether this translates into an uptick in pricing is less clear.
