For some time now there has been a suspicion that both domestic and international investors have been holding off London property until Brexit is resolved, one way or another. While recent indications suggest that London property is still under pressure, there has been a surprising development. On the whole, there are fewer buyers and fewer sellers across the UK due to Brexit concerns. But this is not a situation reflected towards the higher end of the London property market.
London’s exclusive regions
Recent data suggests that Mayfair, Belgravia and Knightsbridge, as well as other luxury property markets in the capital, are now the focus of investors. There has been a 14% increase in the number of buyers across London’s luxury property markets over the last 12 months. The fact that they have been able to negotiate an average 11% discount on original asking prices suggest the market has not turned as yet – but might we be reaching this turning point?
Even though there have been a number of extensions granted by the EU with regards to Brexit, it looks as though we are fast approaching the endgame. Amid rumours of a potential extension until the end of February 2020 the number of political options is reducing at an alarming rate for Boris Johnson’s government.
Those who follow currency markets will be aware that sterling has been particularly strong over the last week with hopes of a Brexit deal on the horizon. Even though Boris Johnson has been refused permission to seek a second meaningful vote on his recent Brexit deal, this cannot go on forever. It will be interesting to see how currency markets, and as a consequence property markets, react to rumours of further amendments to the withdrawal agreement which would bring in a “softer” Brexit.
As we have mentioned on numerous occasions, politicians and the mass media in the UK all have their individual agendas. It is the investment/money markets which will always lead the way and these are certainly suggesting a deal is not far away. Remember, not only do these markets take into account public information but also privileged information, which tends to leak into investment markets.
Are we at the bottom of the Brexit cycle?
It is very dangerous to suggest that Brexit may be coming to a close but that certainly looks to be the situation with a potential change of government on the horizon. The likelihood is there will be no party with a majority after the next election and we will be subject to a coalition of hard left or hard right. The fact that the number of investors looking towards London’s luxury property markets has increased compared to the same period last year is encouraging. History shows that these are the kind of markets which tend to lead the way with the rest of the UK property sector following.
The reality is that while UK property has been under pressure for some time, we are still talking about a reduction in actual growth rates as opposed to a general reduction in property prices. This is the key that many political observers fail to recognise as they try to paint a very different and a very gloomy picture. Yes, we know there have been fewer buyers across the UK in recent months but there have also been fewer sellers. This would indicate that those looking to reduce their exposure to UK property do not believe current market prices are a true indicator of underlying demand and value. Are they right?