Cluttons has released its quarterly London residential market outlook for spring 2017.
Struggling to cope with the revised Stamp Duty charges and the continued uncertainty that has followed in the wake of the Brexit referendum, house prices in Prime Central London have faced some of the most challenging conditions since the Great Recession of 2008; however, conditions appear to stabilising.
While capital values continued to recede throughout 2016 and transaction levels slipped to levels not seen since 2012, the final quarter of 2016 appeared to emerge as a relatively stable quarter for the most desirable postcodes across prime Central London, with values decreasing by a marginal 0.4% on average. There is no doubt that the shock Brexit referendum result accelerated a much anticipated market wide slowdown. However, 8 months on since the decision to leave the EU was taken, we have seen the market experiencing a slightly more normal amount of activity, with buyers and vendors returning after a Brexit induced hiatus.
Underbidding was inevitable given the underlying expectation of an abundance of ‘good deals’, but what buyers are finding vendors unreceptive to below market offers and offer top-ups are increasingly common.
The surge in newly completed buy-to-let stock, is hampering rental value growth, leaving tenants firmly in the driving seat, with the ability to cherry pick from a range of options at virtually all price points. In fact, across our Central London office network, lettings stock is currently sitting at, or close to record highs.
While some international buyer segments are still benefiting from sterling’s weakness, it is unlikely that this cohort will make up for the shortfall in domestic buyer activity. Affordability constraints still linger, as does the availability of appropriate stock.
It is only in 2018 when our model suggests a turnaround in capital value growth and this is predicated on clarity emerging as we approach the end of the two-year Brexit negotiations which are expected to commence imminently.