Savills is warning that heightened uncertainty around Brexit negotiations will delay recovery in the prime central London housing market for up to two years.
It adds that while prime markets across the UK have now “more than corrected” for the stamp duty reforms which hit high-priced property in late 2014, it warns: “the proposed additional stamp duty levy of between one and three per cent on non-UK tax paying international buyers announced at the Conservative party conference is expected to add to buyer caution in the short term and temper the recovery.”
In a revision to its five year forecasts for high value markets, Savills says that until Brexit negotiations are complete, the market will remain price sensitive and driven by needs-based purchases - “This will put price growth on pause for the next two years.”
The agency says values are then expected to rise for prime properties by an average of six per cent in 2021 and a combined total 12.4 per cent over the full 2019-2023 five year period.
Brexit has not altered the fundamentals of why people want to live and invest therein London, Savills says.
“Despite successive stamp duty increases, London remains mid table compared to other leading world cities in terms of buying and selling costs” says Lucian Cook, Savills’ head of residential research.
“The proposed [foreign buyer] surcharge will not substantially change that, rather it’s a clear signal to those still hoping to see a rate cut at the top end of the market that the higher rates are here to stay”
Beyond the London commuter belt there has been a slower recovery in prime markets, the agency notes, adding “there has been little buyer urgency over the past year to boost values.”
But it predicts that over the next five years, the wider South, Midlands, North of England and Scotland are all expected to outperform London in terms of price growth.
“Buyers see that the price gap between London and the country markets has probably stopped growing, so are more willing to sell up and make the move out,” says Cook.
“But rather than extending their borrowing, many are looking to buy a bigger home and potentially reduce their mortgage at the same time, capping price growth at the relatively modest levels we are forecasting.”