The decision by the UK to leave the European Union accelerated the slowdown in the prime property market in central London but it is now seeing a more normal amount of activity, according to the latest research from real estate firm Cluttons.
The analysis which comes eight months on from the referendum on membership of the EU says that the market is experiencing a slightly more normal amount of activity, with buyers and vendors returning after a Brexit induced hiatus.
It said that house prices in the central London prime market have had to cope with the most challenging conditions since the economic downturn of 2008 but now conditions appear to be stabilising.
The report predicts that 2018 is likely to mark a turnaround for house price growth in the sector. It forecasts that house prices in prime central London will fall by an average of 1.2% this year but by the end of next year growth of 1.3% is expected as the UK nears the end of the Brexit process.
Between 2019 and 2021 growth is forecast to average between 2.5% and 3% which should deliver cumulative growth of 10.3% over the next five years.
Overall in 2016 prices were down 3.8% and transaction levels slipped to levels not seen since 2012, but the final quarter of 2016 was relatively stable for the most desirable postcodes across prime central London, with values decreasing by a marginal 0.4% on average.
Sales performance varied according to location with Westminster, Islington and Hammersmith and Fulham hardest hit with transactions down 49%, 21% and 32% respectively, according to figures from the Land Registry.
In terms of prices the steepest fall was in Knightsbridge, down 10.8%, followed by South Kensington down 10.2%, Chelsea down 9.8% and Belgravia down 9%. But international buyers remained active in these markets, securing what they regarded as good deals and benefitting if they were buying in US dollars.
But the report points out that while some international buyer segments are still benefiting from sterling’s weakness, it is unlikely that this cohort will make up for the shortfall in domestic buyer activity. Affordability constraints still linger, as does the availability of appropriate stock.
“It is only in 2018 when our model suggests a turnaround in capital value growth and this is predicated on clarity emerging as we approach the end of the two year Brexit negotiations which have just started,” the report said.