The London-focussed estate agency Cluttons says chains in central London are becoming increasingly fragile thanks to general uncertainty in the wider economy leading to more nervous purchasers.
“The weaker appetite to scoop up deals is...making vendors nervous, with uncertainty trickling through to property chains, which appear to be increasingly fragile. In fact we have noted both buyers and sellers routinely dropping out of the sales process in recent months” says Faisal Durrani, head of research at Cluttons.
“They are instead opting to take a wait-and-see approach, while others are choosing to temporarily let their homes instead, creating separate challenges in the lettings market ... The fragility of property chains is one of the chief reasons that homes are taking longer to sell as many on the property ladder are unable to free up equity to make their next purchase” he adds.
The agency says the weakness in transaction volumes, especially in prime central London areas, reflects “the diminished appetite to invest even amongst the critical international buyer cohort.”
Cluttons says “the added complexity of the yet unquantifiable impact of Brexit is weighing heavily on the market, with ‘perfect storm’ like conditions created by the affordability issues faced by average Londoners and the near constant tinkering of the residential tax regime. The performance of values is being further hampered by political rumblings in Westminster and a tense global geopolitical landscape.”
The agency believes that the small increase in the Bank of England’s base rate will do little to destabilise the market but it also believes last week’s Budget announcement on the scrapping of stamp duty for most first time buyers will do little to help improve the London market overall.
As to next year and beyond, the agency says: “With no signs to suggest a reversal in critical issues such as the affordability of homes in the capital, or the uncertainty around Brexit, we expect prices to continue declining during the final months of 2017.
“With this in mind, we forecast residential values in prime Central London to end the year 2.8 per cent down on 2016, while next year is likely to remain at as well, with a marginal 0.7 per cent rise forecast.
“As we approach the end of the Brexit negotiations in Q1 2019, we expect clarity on Britain’s post-Brexit EU relationship to help boost and solidify overall buyer and investment activity and so a 2.0 per cent increase in average house prices is expected that year. Overall, to the end of 2021, we forecast cumulative growth of 7.3 per cent in average residential prices across prime Central London; which compares to growth of 16 per cent over the five year period between 2011 and 2016.”