Brexit's Impact on Luxury London Property

Four London-based property experts weigh in on the impact of Boris and Brexit on the city's high-end residential market.

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Saul Empson, Director, Haringtons Buying Agency

"Parliamentarians have defied Boris and it looks like we’ll have a general election in the coming weeks. My best guess is that we will end up with a hung parliament and still no Brexit.

In that scenario, I suppose that the question of Brexit would have to be handed to a cross-party committee and we will subsequently end up watching an exercise in herding cats.

But in any case, I think that the effect of Brexit on the London market is rather over-egged. For a start, it is European buyers who are affected by the turmoil surrounding Brexit. But for people coming from the Far East, Asia, Australasia, Russia and America, nothing will change, merely the pound looks rather cheaper than it has done for some time.

Uncertainty around the outcome of Brexit negotiations has undoubtedly caused many domestic and European buyers to sit on their hands. The prospect of a Corbyn-led government is a very real threat to the upper end of the market and is leading to continued paralysis at the upper end of the market.

We have clients who want to buy - life goes on regardless of Brexit - but supply is being squeezed more than ever before - caused by the many sellers who can afford to wait and see what happens next with Brexit.

Having said that, whilst the political backdrop is not helping matters, it is the increased level of Stamp Duty Land Tax (SDLT) which has stopped segments of the market in its tracks and has resulted in the fall in the number of transactions across the board but especially at the top end of the market.

However it is not all doom and gloom. The market for houses and apartments in the £1m-£2m range is still strong - after all people have to live somewhere - whether from international clients looking for a centrally located apartment for their child whilst they study in London, or for the domestic buyer looking for a pied-a-terre in London whilst the family resides in the countryside or the amateur investor looking to capitalise on the AirBnB potential which is dominating parts of Central London.

If you have to live here, the choice is either paying someone else’s mortgage via a rental, or paying your own which, long term, is something of a 'no-brainer’.

Whilst discretionary property purchases have slowed to almost a standstill, the ‘life goes on’ market is still full steam ahead and even Brexit negotiations can’t stand in its way."

Naomi Heaton, Chief Executive, London Central Portfolio

"If you are not the proud possessor of a crystal ball, it is quite impossible to predict the outcome of the current political crisis in the UK. Indeed, BoJo may not even be PM by the time this goes to press!

However, the reality is that there has been uncertainty for three years, with investors into high end property waiting to see how Brexit will play out. Coupled with a series of punishing tax increases over the last few years, the result has been a dramatic fall in the number of buyers. In prime central London, there are currently fewer than 60 transactions a week, the lowest number on record. The consequence has been a marked decline in prices of around 20% since 2014, which now appear to have reached their low point.

So the likelihood is that more Brexit uncertainty will not push prices much further down and whilst sterling is oscillating as quickly as the Westminster farce unfolds, it is already cheap and likely to harden long term. All reasons for the savvy investor to come back into the market. Indeed over 2019, there has been an observable mood change amongst Asian investors with money to spend who are becoming impatient. So the shenanigans in the UK parliament may well not be a dampener. There is an increasingly prevalent view that global uncertainty is the new certainty, whether it be the problems in the Middle East, Hong Kong or the US/ Chinese trade war. For many, prime central London real estate is increasingly looking like a good bet.

So the B-word (Brexit) may not have the negative impact on high end property that some commentators might predict. In fact, buyers coming in now may well enjoy a significant market bounce further down the line. The C-word (Corbyn) is probably of far greater concern, with the prospect of an imminent general election and an extreme left-wing government coming into power. However, we may not even see Corbyn or Johnson leading their respective parties into an election. And with the country voting along remain/ leave lines rather than traditional party allegiances, the odds are on a coalition government taking control. The good news is that given the likely very tight timescales for another election, investors will not have long to wait."

Will Watson, Partner and Head of London, The Buying Solution

"This huge uncertainty is in actual fact creating more and more opportunities for those braver buyers who see now as the time to invest with a long term view many buyers are now thinking we are at the very bottom of the market. The currency play means in some cases buyers can achieve a circa 50% reduction on prices since 2014, a combination of reduced values and the discounted sterling. These buyers could well be the ones who look back in five years plus having bought very well. It is all about targeting the vendors that need or want to sell.

A few clients have indicated that another referendum is the only way to resolve the current turmoil in government. A simple vote on whether we leave with no deal or we except what Europe is offering us. Otherwise there is a concern that there will be further delays until January and who is to say we would be any closer to a deal then. For those thinking of selling now, there is very much market provided the pricing is sensible.

Plenty of buyers are looking and are frustrated by the lack of available stock. We are still seeing competitive bidding for best in class property and prices remaining firm. Anyone holding dollars is in a particularly strong position; we’re seeing American and Middle Eastern buyers looking to invest with very much a long term view of holding onto the property. Ultimately London is London and regardless of Brexit, the fundamentals remain unchanged - a financial capital, rule of law, the time zone, the education system, robust regulatory framework, culture, healthcare, connectivity and of course an excellent choice of good quality housing stock.”

Jo Eccles, Founder of SP Property

“Whilst continued uncertainty is not helpful, we remain confident on London’s ability to retain its position as a leading global financial hub and believe the prime central London property market will continue to appeal to buyers seeking long term capital growth.

“The city’s strong fundamentals, namely its robust regulatory framework, favourable time zone, cultural diversity and exceptional education system means that whatever the outcome of the ongoing Brexit negotiations, we are unlikely to see any meaningful or prolonged retreat amongst HNWIs seeking a home in London’s finest postcodes.

“We are currently seeing demand from overseas clients from the Middle East, Asia and America keen to capitalise on the favourable currency play, as well as London based needs-based buyers for whom continuing to hold out is not an option. The threat of a potential Labour government also seems to have subdued this week after MPs ruled against a general election. This comes as a relief for many of our buyers given the Tories’ more favourable policies toward high end property.

“Ultimately though, there is very much a 'life goes on’ attitude with the general consensus being positive for London over the next five or so years."

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