Brexit and political fears now key drivers of prime London says agency

The battered prime central London market is now suffering from the UK’s wider political volatility, the lack of stability of the government “and the political outlook of any potential new prime minister” according to high end agency Knight Frank.

In its latest gloomy survey of the London market, the agency says two thirds of prime central London postcodes reported an annual house price drop in the year to June, while the peak-to-trough decline in prices has now reached 9.0 per cent.

It says that while there are some signs that the downturn in the PCL area may be nearing its bottom “trading conditions remain subdued by historical standards, which indicates other forces are at play.”

It also says the upfront costs of buying a property have dampened purchases but “more significantly” political uncertainty has become the key issue. 

“As Brexit talks continue against a fluid UK political backdrop, questions will surround the stability of the government and the political outlook of any potential new prime minister. In this way, sentiment has become a more important driver of demand, which makes the future direction of the market less predictable” according to survey author Tom Bill.

“One factor that is weighing on pricing is an uptick in supply, which is creeping higher as more landlords attempt to sell due to recent tax changes. It remains to be seen whether some vendors will revert back to the lettings market if pricing expectations are not met” he adds.

“One factor that is weighing on pricing is an uptick in supply, which is creeping higher as more landlords attempt to sell due to recent tax changes. It remains to be seen whether some vendors will revert back to the lettings market if pricing expectations are not met” he adds.

The agency’s analysis shows the the highest price rise in the PCL area was 2.1 per cent over the course of the past year in Notting Hill - meaning that, once inflation is taken into account, even this location has seen prices treading water at best.

The PCL lettings market is scarcely in better shape - in June this year, annual rental value growth went into positive territory for the first time in 28 months, but even then showed an annual growth of just 0.8 per cent.