DBPR asked Christopher Mitchell and David Lee of Mayfair agents Pastor Real Estate about the Brexit effect on the Prime Central London property market.
Following the EU referendum result in June last year we have seen a correction of asking prices by around 10 to 15% in prime London postcodes with many would-be purchasers taking a step back from the market to pause for thought.
However, since the beginning of the year, the depreciation in the value of sterling has seen a recent surge in demand from those buyers looking to take advantage of favourable currency exchange rates and reduced competition.
London has a long history as one of the safest places to invest in the world. Out clients consistently tell us they have great confidence in London in the long term, so see the current market as opportunistic.
The Brexit effect: drop in sterling and foreign interest
Many buyers purchasing, in US dollars for example, see Brexit as an excellent buying opportunity. This coupled with many sellers having realigned their selling expectations has brought about new interest in the market.
Despite the perceived uncertainty surrounding the Brexit effect, many experienced investors from Gulf regions are capitalising on market sentiment and the wider market correction. Activity from Asian, African and US dollar purchases has increased significantly in recent months.
Where is the demand coming from now?
Interest from Middle Eastern purchasers has always been a significant factor in prime central London and this is not likely to change any time soon. These purchasers continue to actively purchase and sell some of the capitals most expensive and luxurious properties.
This summer we have continued to see strong interest from middle eastern applicants registering to buy in Mayfair, Knightsbridge and Belgravia in particular. These purchasers are well versed in the nuances of the Prime London market and continue to see areas such as Mayfair as a safe long term investment.
Currently we have seen no recent data to suggest that London properties are being purchased as a hedge against mounting geopolitical tensions. However, historically in times of uncertainty around the globe, many have looked to London property due to its rule of law and political stability.
That said, it is true that Asia, and in particular China, has been a major investor in prime central London in recent years. Therefore it is perhaps relevant to start to consider the impact of such things
Lack of stock in the prime market
Lack of stock has always been an issue in the wider UK market but the two are very different forces. PCL is a much more international marketplace, with the highest concentration of £1 million plus properties; more than any other UK city. With such high prices, volatility is always going to be most apparent in the prime postcodes. Brexit is not the first time London has experienced political and economic challenges. Advances in technology simply mean that people are more aware of the impacts and reactions happen faster.
Like Monaco, Paris, New York, Hong Kong, and other international financial centres, prime central London has repeatedly shown its ability to weather a storm and bounce back. No doubt this moment is simply another inflection point in the market that will eventually be overcome. You only have to look back at the financial crash of 2007 to realise how capable the London market is of rapid recovery.
Brexit effect on London prices over the next 12 months
Despite a well publicised correction in prime central London, many outer boroughs have in fact seen significant price increases over the past 12 months. The London market should be seen as quite independent to the wider UK market. London is made up of a large number of smaller micro markets.
This is one of the reasons why Pastor Real Estate is opening a new Chelsea office in the next few months as the area experiences much higher volumes of transaction than many of its other prime central London counterparts.