London property market set for Brexit fallout

Ryan Fowler

June 30, 2016

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Last week’s EU Referendum is set to have a hugely varied impact across London’s property markets, according to to independent property buying agency Black Brick.

Black Brick said that the sub-£2m price bracket will continue to attract investors – due to its favourable yields, good liquidity, and domestic demand.

But it warns that the same can’t be said for the Prime and new-build outer prime markets.

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Camilla Dell, managing director of Black Brick, said: “We expect the section of the market dominated by domestic buyers and those working in the financial services sector – predominantly £2-5m, but also up to the £12-15m range – to potentially face some pressure linked to Brexit concerns.

“We do not expect the wholesale flight of financial services firms away from London, but it is likely that they will lose their “passporting” rights, or their ability to sell financial services across the EU, if the UK does leave, triggering the departure of some financial services capacity to Dublin or the continent.`

“However, even relatively low numbers of bankers leaving areas such as South Kensington or Notting Hill – where Europeans, in particular, tend to be concentrated – could have a significant effect on local markets over the next couple of years.”

Black Brick also expects the new-build outer Prime market to suffer most from continuing uncertainty, having already experienced a lull period before the referendum vote.

Dell said: “The stock market has already heavily bid down builders linked to this part of the market, which is suffering from significant oversupply and the disappearance of the foreign investors who had supported it in recent years.

“Areas such as Nine Elms in Vauxhall and Earls Court in West London are particularly vulnerable due to oversupply of expensive properties aimed at the overseas investor. However, there are a handful of stand-out developments – such as Television Centre – that we believe are likely to continue to prove popular, and there will certainly be bargains to be had, particularly on the secondary market.”

On the other hand, Black Brick expects the Super Prime market to be the least negatively affected, with the collapse of the sterling meaning that dollar buyers are actually factoring in a 12.5% increase in their purchasing power since before the poll.

Dell added: “For the global elite buying properties at £15m-20m or above, purchases tend to be about lifestyle choices, rather than business decisions, or are to diversify extremely large portfolios. Indeed, we are still seeing transactions continue; Brexit did not feature in conversations with clients in this part of the market before the referendum, and it is unlikely to be much of a factor now it is underway.”