Leading estate agent Savills has announced what the company believes to be a major turning point in the London property market. As yet unpublished data for the final three months of 2019 is said to show that London property prices increased by 0.1%. This is the first time that prices have increased on a quarterly basis since 2016. So, what can we expect in the short to medium term for the London property market?
Future forecast
The company believes that prime central London property will rise by 3% in 2020 and an additional 20.5% by 2025. When you compare this against six years of sliding prices and weakening confidence it would certainly appear to be an interesting turning point for the London property market. If we compare the relatively modest increase of 0.1% in 2019 to a fall of 4.2% in central London and 2.8% in the wider suburbs in 2018, this put it into perspective.
Savills also revealed that some of the more exclusive neighbourhoods in London such as Kennington and Mayfair are still 20% below their 2014 peak in property values. However, as and when the market does turn, history shows that these exclusive neighbourhoods will lead the way.
Warning on Brexit
While Boris Johnson gaining a majority in the House of Commons is a major step forward with regards to Brexit, there is still a lot to do. It is inconceivable that we will not see ups and downs during the negotiations with the European Union. Indeed, recently we saw the Labour Party attempting yet again to extend the transitional period by up to 2 years. This was despite the fact that the opposition have no chance of pushing through any amendments with Boris Johnson holding such a huge majority in Parliament.
After the initial post-election surge in the value of sterling against the likes of the dollar and the euro, things are starting to settle down a little more. Savills is also expecting overseas investors to return to the London market en masse. In reality, London has been and will remain a prime market for prime property investors – whether or not it is part of the European Union.
No significant bounce until 2021
While Savills is generally positive on the UK property market going forward the company does not forecast a significant bounce until 2021 – at which point Brexit will be clearer. The reality, as we have said all along, is that both the UK and the EU will have to soften their tough negotiating stances. While neither party will agree this in public, they both know that they need each other otherwise there will be significant economic consequences for both the UK and the EU.
Summary
It is safe to say that confidence is slowly returning to the London property market and property prices will follow suit. Brexit is a little clearer but the end result is still in some doubt with the EU and the UK at opposite ends of the spectrum in relation to negotiations. However, each party needs the other to agree a trade deal as soon as possible. While Northern Ireland is still a major problem, would any party really risk a no deal scenario and default position to WTO rules?