Two reports have suggested London’s residential market may be damaged by Brexit - both the past two and a half years of squabbling and the possibility of a No Deal departure from the EU in the near future.
“The chances of a hard Brexit have increased significantly and there are escalating worries for a number of UK property sectors – namely retail, London offices and London residential” according to Rogier Quirijns, portfolio manager of the Cohen & Steers European Real Estate Securities Strategy.
“We believe prime areas, such as the City of London and Mayfair, should feel the impact of the exit from the European Union hardest. Just as London has been a major beneficiary of the growth of the EU over the past three decades, it will likely stagnate over the coming 10 years” warns the company.
“For example, financial services passporting, in its current form, is not envisaged under the current government Brexit plan. This is going to have a significant impact on the London office market. It should force many City firms to cut costs in London and reinvest to establish EU-domiciled operations” the firm claims.
“Many such groups have already begun to set up EU headquarters, in places such as Frankfurt and Paris. As for the London residential space, it is already witnessing a sharp correction” it adds.
Meanwhile a new Knight Frank report shows that London has lost much of its international dominance in the so-called ‘ultra prime market’ over the past three years as high stamp duty and Brexit uncertainties have combined to reduce purchases.
The agency defines ultra-prime markets as those 17 locations in the world where there have been at least three transactions over $25m each year, over the past three years. It looks at cities, second home destinations and ski resorts reaching the $25m benchmark.
The agency says that back in 2015, London’s transaction volumes above $25m were almost double the number seen in any other location.
But the report continues: “This position has changed in recent years as higher stamp duty charges and concerns over Brexit have reduced the number of sales in London, while other markets have seen their sales increase.
“Notwithstanding this relative decline, London’s average annual transactions over the most recent full three year period, at 48 is higher than that of New York and Hong Kong with 40 and 38 respectively.”
Knight Frank says the traditional ultra-prime markets in Belgravia, Mayfair and Knightsbridge attract the most activity, with these areas alone accounting for 62 per cent of transactions in 2017.
The most common property type being sold are houses, which account for, on average, 54% of transactions. The average price for ultra-prime sales in London was $42.5m over the most recent full three year period - this makes the UK capital the second most expensive location behind Hong Kong.
The other ultra-prime city markets aside from London and HK are New York, Los Angeles, Miami, Paris and Sydney.
The second-home ultra prime locations are Malibu, Palm Beach, Cote d’Azur and Monaco, and the Caribbean region. The ski resorts are St Moritz, Gstaad, Courcheval and Aspen in Colorado.