London’s lethargic high-end property market will bounce back to growth once the uncertainty of Brexit has been settled, according to Savills.
After years of price falls and sluggish activity, the most expensive homes in central London will rise in value by 8pc in 2020. Between 2018 and 2022, prices are forecast to grow by 20pc, which would recover the fall of 15pc made since 2014.
“We think the risks regarding London’s position as a global commercial centre have been overplayed,” said Yolande Barnes, head of world research at Savills. “Whatever the challenge from other cities, London will almost certainly remain a key global financial centre and develop as one of several European hubs for the growing tech sector.
“Its prime markets will therefore benefit from new domestic wealth generation as well as attracting wealthy international buyers.”
Savills’ assumption is based on the Government avoiding a “hard Brexit”, with transitional agreements put in place to “minimise business disruption” and free trade agreements established with EU members.
However, it forecast that this house price growth will be more moderate than in the past, when there was average annual price growth of 5.7pc above the rate of inflation between 1979 and 2014. This is partly due to much higher levels of stamp duty on expensive property.
Before the UK’s relationship with the EU is decided there will be flat levels of house price growth as investors put off purchases due to the uncertainty.
House price growth in expensive areas of London outside the centre will also be more moderate, at 5pc in 2020, partly because the market is “more influenced by trends in the high value employment sectors such as finance, banking and tech, as well as the availability and cost of mortgage finance” according to Lucian Cook, head of residential research at Savills. These are “all factors that will constrain price growth”, he said.
Asking prices are currently being slashed as demand for these homes is low: analysis of TwentyCi data by Savills found that in the 12 months to June there were 122 price reductions for every 100 properties on the market in London worth more than £1m.
Across the country, for every 1,000 £1m home, 76 had asking prices slashed.
There was also a 20pc fall in the number of such expensive homes brought to market in the first half of this year, compared to the same period in 2016.