London Property and Brexit: A Brief Guide

London PROPERTY AND BREXIT: A BRIEF GUIDE

What is the current Brexit situation?

Boris Johnson has stated he is determined to withdraw the UK from the European Union by 31st October, 2019 at the very latest – with or without a deal. The possibility of a no-deal Brexit is hard to predict as many in Parliament are strongly opposed to a ‘no deal’ and various legal challenges are being mounted to prevent this eventuality. With less than 3 months to go until the Brexit deadline, the final outcome is still unknown. 

What has happened to London house prices in the last 12 months? 

Any market is affected by uncertainty and London’s property market is no different. If the market is defined by one thing it is not dramatic price changes but the limited number of transactions.  Many active buyers are frustrated by the lack of housing stock and the UK’s low interest rate environment and the smaller proportion of mortgage holders in London compared to a decade earlier means there are a limited number of forced sellers. 

According to Rightmove’s July House Price Index, most London boroughs have seen modest declines of less than 2% over the last 12 months. However there have been larger falls in certain areas of prime central London such as 4.8% in Westminster and 4% in Kensington and Chelsea. Based on our own experience, these larger falls are mainly due to buyers securing greater discounts on prime properties priced above £2m. Elsewhere, Tower Hamlets, containing the financial district of Canary Wharf, has had the largest annual price fall of 7.4%. This can partly be attributed to the struggling luxury off-plan market which was previously overheated. We have covered the issues with off plan property in London in more detail here. 

Hometrack is now suggesting that London is coming to the end of a “3-year repricing process” and the decline in sold prices appears to be slowing.  We agree with this sentiment and are noticing that auction properties priced marginally below current market values are attracting very strong interest. Vendors and estate agents are gradually becoming more realistic with asking prices and it is encouraging  that the average time to sell a property has decreased for 5 consecutive months. This is providing Perrygate with more opportunities to match our clients with realistic vendors. 

What does this mean for buyers? 

We are in a buyer’s market. Those willing to capitalise on the current uncertainty can secure significant discounts on asking prices. There are also opportunities to do deals with private developers looking to exit from completed schemes and secure financing for future projects. The slow market also presents an excellent opportunity for London homeowners upsizing. After all, a 5% discount on a £2m house purchase is more than a 5% discount on the sale of a £700,000 flat. 

Current Brexit uncertainty and the low value of the £ means many overseas buyers are seeing even bigger opportunities in London. Many international clients now regard London property as excellent value compared to other global cities such as New York and Hong Kong. Of course the key question for any international buyer is when to put funds into £ and ‘lock-in’ the exchange rate against their own currency. 

"For international buyers the most important market trend is the fall in Sterling against major currencies."

Value of Pound Sterling against major global currencies over 5 years: Source: Google 16/08/2019

Can I still buy before Brexit? 

Yes, there are still opportunities for people looking to act decisively. If you are looking to capitalise on the current uncertainty having a team of experienced professionals is key. As a buying agent, we work with various highly-respected solicitors, surveyors and financing firms who can assist clients achieve a quick transaction. For those looking to buy in a very short space of time, attended exchanges may be an option worth considering. 

How can a buying agent help?

We have spoken to many selling agents who have said they have never seen a greater difference in opinion between what different buyers value a property at. A buying agent’s job is to help their clients buy something which represents value in the current market at a time when many properties are still being marketed at 2016 prices. 

A key role of a buying agent is identifying genuinely motivated sellers often affected by one of the three Ds – death, debt and divorce. We are also active in London’s off market where buyers have more negotiating leverage. 

What will happen to the London property market after Brexit? 

The short answer is nobody knows for sure. However we would be very surprised if the Spring 2020 market is not considerably busier than a year earlier.  

A disorderly Brexit could potentially lead to a further fall in Pound Sterling. At Perrygate, we feel this would lead to a greater influx of international investors which could even potentially boost prices in areas of Prime Central London. 

In the long-run, we are very confident London will continue to be a major global city with its robust legal system, world-class educational and cultural institutions creating strong demand. There is also the inherent advantage of Greenwich Mean Time allowing the financial sector to trade with US and Asian markets over the course of a day. 

Of course, buyers should always have a long-term perspective and London property has historically been an excellent long-term investment. Research from Knight Frank shows Prime Central London property has outperformed other asset classes such as the FTSE 100 and gold over the last thirty years. 

Whatever the outcome of Brexit, we don’t see other European cities like Frankfurt or even Paris competing with London. It is hard to overstate the importance of having English as a first language. There is also a finite amount of land in London and a strict planning environment which limits the supply of new homes. The increasing number of millionaires worldwide (particularly in the BRICS economies) who will need to find a home for their money and central London will still be the obvious choice for many. 

If you are interested in buying a property in London or have any general questions about the market, contact us today at [email protected] or on 0208 0880 522.

 Perrygate is not a financial advisor and anyone considering purchasing UK property must undertake their own due diligence. The opinions expressed in this and other articles are the personal opinions of staff at Perrygate and are not investment advice. The value of an investment may go up or down. Please see our Terms of Use  for more information.