The prime London property market is expected to witness low price growth this year due to factors like mismatch between demand and supply, Brexit-linked economic uncertainty and the threat of higher inflation.
The latest analysis projects prices falling by 0.7% in the prime central London market towards the end of this year with property price and type set to be critical differentiators but prices are forecast to rise by 1% in 2018.
The report from real estate firm Cluttons also indicates that so long as the Brexit negotiations stay on track the price of property would rise by 2-3% between 2019 and 2021. The cumulative growth should reach 8.6% between now and the end of 2021 but this is considerably lower than the near 30% rise in values recorded across prime central London over the last five years.
Price rise is not expected to be uniform in the different regions. The firm predicts that numerous places will see prices remaining unchanged over 2017, most notably Westminster, St John’s Wood, Regent’s Park, Hampstead, Battersea, Clapham, Wandsworth, and the South Bank.
Other regions are likely to see some incremental price growth, with South Kensington prices forecast to rise by 2.1% this year, Knightsbridge by 1.3%, and Chelsea by 1%. The City could see prices rise by 1.4%, Farringdon and Wimbledon by 1.8%, Richmond 1.3%, Dulwich 2.7% and East Dulwich 3.2%.
Locations likely to see prices falling in 2017 include Marylebone with a fall of 2.3%, Notting Hill down 1.9%, Kensington down 1.6%, Hyde Park down 1.3%, Nine Elms down 1.9%, Wapping and Mayfair down 0.8% and Holland Park down 1.4%.
The report explains that the threat of increase in the supply is on the wane with anecdotal evidence suggesting that much of the supply is finding its way onto the rental market. However, rents are forecast to fall in many locations.
‘General apprehension around the stability of values at the top of the market has meant buyers have moved into a holding pattern while we work our way to the bottom of the current property cycle, further dampening the prospects of an immediate rebound in the performance of values for high end homes,’ the report says.
The report observes that there has been an increase in requirement from Gulf based investors looking to capitalise on sterling’s weakness and some developers’ willingness to offer discounts on bulk deals, especially off plan homes. However, cash flowing in from the Middle East is unlikely to emerge as the sole catalyst of the market’s turn around.
Despite keen interest shown by Middle East and Far Eastern buyers, the market appears to be plateauing off with the sales slowing, the report adds concluding that overall, a prolonged uncertainty due to political environment in the UK, coupled with affordability issues, continue to suppress buying activity, especially in higher price brackets.