‘A Lack of Urgency’: Prime Central London market continues to soften

'Increased levels of political and economic uncertainty make it less likely that year-to-date losses will be recovered in the short term', says Savills

Over 12 months have passed since the UK voted to leave the EU, and although the worst predictions have so far failed to materialise, it sounds like London’s prime property market still has some “bottoming out” to do.

Average values in the prime postcodes slid by a further 0.9% in Q2, reports Savills, taking the annual decline to -5.3% and leaving them -6.9% down on the heady, pre-SDLT reform days of mid-2014.

Buyer sentiment has taken a big hit from all the political and economic uncertainty, with Prime Central London – unsurprisingly – the worst affected. The golden postcodes are also struggling under the heaviest SDLT burden, and have seen prices drop by an average of -1.3% in the three months to June, taking the aggregate fall to -14.4% over the last three years.

“There is a lack of urgency in the market and those who need to sell may have to adjust their expectations further, says Director of Residential Research Lucian Cook.

Perhaps the most important measure – transactions – makes for slightly more encouraging reading. After the taps went off in the wake of last year’s stamp duty stampede, volumes have started picking up again, with 864 £1m+ sales recorded so far this year, up 9.2% on H1 2016, but -8.9% down on the same period in 2015. Turns out the general election didn’t have much of an effect after all…

Outer Prime London has fared significantly better than PCL, with prices in the £1m-£2m range holding steady since 2014. The £2m+ bracket has seen average falls of around -8%.

Meanwhile, the same limiting factors are also at play in the prime country markets, which saw zero growth over Q2, leaving annual growth at just 0.9%. Markets closest to the capital are now feeling the negative effects rippling out from PCL, and were the worst performers over the last three months.

The firm’s updated forecasts are slightly less hopeful for the short term than they were in October, given that Brexit negotiations are likely to undermine any upward pressure on prices over the next couple of years. 2019 could be the year we see stronger growth returning to the market, says the research team, “assuming the economy begins to improve and confidence picks up”.