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How is the shape of the Prime Property Market post-Brexit?

12th December 2016 Print
Prime property

The Prime Property Market has remained a key focus of the UK’s economy since the EU Referendum. House price growth slowed immediately following the referendum and continuously so until September this year, falling from an annual growth rate of 8.3 percent in July to 9.7 percent in August. The increasing levels of demand requiring about 200,000 new homes each year in the UK, and the shortage of supply, has continued to fuel the increase in property prices in the UK. The monthly Halifax index has shown price increases for two months running in September and October, at a rate of 1.4 percent and London experiencing increases of 12.3 percent.

A Market for Investors

Following the EU Referendum, estate agents and mortgage brokers reported numbers of transactions halted due to buyers pulling out of sales. However, the pound falling to a 31-year low has led to an increase in overseas investors replacing those losses and is helping to boost the prime market. Currently, the decreased value offers up to 10 percent discount for buyers in the US, and the most transactions made in US dollars were Americans who had already been renting in the UK. The drop in value has also led to more frequent and larger negotiations in house prices, up to an average of £25,000 on a UK property, which is up from the £4,000 average reported in January.

Lending is also extremely favourable right now, with interest rates expected to remain below 2% for at least the next year and with fixed deals at 3% for ten years. This outlook significantly reduces the risk for investors and makes up-sizing more attractive. With these rates also reducing household debt since 2008, families can invest without any sudden shocks.

The prime property market, post-Brexit

During the three months of June to August, property prices declined each month consecutively for the first time in four years. With the third quarter seeing a drop of 0.5 and resulting in a £214,140 average home valuation, down about £1,000 since June. These figures, however, are up 5.7 percent compared to those of the same period last year, but London prices dropping by 2. percent puts numbers down 6.8 percent from the second quarter. 

The UK has experienced a 15 decrease of new home registrations over the last six months, with a 62 percent drop in London. The last two months have seen rises in house prices, with the average property entering the market at a 0.9 percent rate than last month, reaching £309,122. London has experienced the biggest increase in asking prices entering the market, up 2.4 percent with an average price tag of £645,833.

For buyers looking for a new home in prime central London, the amount of available properties listed is vast. The start of August this year offered 161 available properties for sale in Mayfair, which is 24 percent higher than 2015 and 67 percent higher than 2014, according to a new report from Wetherell. Of the listing, there are 40 percent more flats and 37 percent fewer houses than the properties listed in August 2015. Since they first entered the market, prices have dropped on 45 percent of apartments and 36 percent of homes, with properties selling at an average of 89 percent of their initial asking price so far this year, which is down from 92 percent last year. With £750 million worth of residential property available for sale in Mayfair, buyers are in a good position, with increased levels of stock and achieved asking prices only dropping three percent since last year.

Transaction Volumes in Prime Central London

With what Mayfair has available, property values continue to be strong, but volumes of sales are substantially lower. The number of properties sold in the £10 million and over market dropped by 19 percent this year, but this is significantly less than the rest of prime central London, which saw 32 percent fewer transactions. January and August experienced 35 percent fewer sales than last year on properties priced over £10 million, yet sales were even lower with a 44 percent drop in properties priced under £10 million.

The number of properties priced over £10 million across prime central London has increased by 25 percent since August, jumping from 100 to 125. This offering has led to the notable difference of the markets, due to the choice of properties available on the market for buyers looking to invest in this price range.

Although the housing market activity has dropped, compared to last year, and property sales have decreased since the referendum, the market is now looking confident and beginning to stabilise. The Royal Institution of Chartered Surveyors predicts that house prices will increase by 3.3 percent a year on average for the next five years.

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Prime property