Brexit may trigger prime London slump - but not for 'the global elite'

A leading London buying agency is warning that some areas of prime central London could face a downturn following the Brexit vote - but that the world’s “global elite” won’t be affected by the UK leaving the EU.

Camilla Dell, managing director of the Black Brick agency, says investors drawn to homes selling in the sub-£2m price bracket will continue, because of those properties’ favourable yields and domestic demand.

But she warns “the same can’t be said for the prime and new-build outer prime markets.”

Dell says sales of homes priced between £2m to £5m and then £12m to £15m are in many parts of prime London dominated by investment bankers and hedge fund managers.

“We do not expect the wholesale flight of financial services firms away from London, but it is likely that they will lose their ‘passporting’ rights, or their ability to sell financial services across the EU, if the UK does leave, triggering the departure of some financial services capacity to Dublin or the continent” she warns.

“Even relatively low numbers of bankers leaving areas such as South Kensington or Notting Hill – where European bankers, in particular, tend to be concentrated – could have a significant effect on local markets over the next couple of years.”

The agency also expects what Dell calls “the new-build outer prime market” to suffer most from continuing uncertainty, having already experienced a lull before the referendum vote.

“Areas such as Nine Elms in Vauxhall and Earls Court in west London are particularly vulnerable due to oversupply of expensive properties aimed at the overseas investor. However, there are a handful of stand-out developments – such as Television Centre – that we believe are likely to continue to prove popular, and there will certainly be bargains to be had, particularly on the secondary market” she says.

“The stock market has already heavily bid down builders linked to this part of the market, which is suffering from significant oversupply and the disappearance of the foreign investors who had supported it in recent years” Dell adds.

However, Black Brick expects the Super Prime market - which it describes as homes costing £15m to £20 or even more - to be the least negatively affected, with the collapse of the sterling meaning that dollar buyers are actually factoring in a 12.5 per cent increase in their purchasing power since before the poll.

“For the global elite buying properties at £15-20m or above, purchases tend to be about lifestyle choices rather than business decisions, or are to diversify extremely large portfolios. Indeed, we are still seeing transactions continue; Brexit did not feature in conversations with clients in this part of the market before the referendum, and it’s unlikely to be much of a factor now.”