Brexit fears hit central London property market as overseas buyers steer clear

The uncertainty surrounding Brexit and movements in the pound have impacted central London’s property market, which caused overseas buyers, who tend to buy more homes in that area, from purchasing.

In terms of sales, the difference between the annual price change in prime central and prime outer London was at its widest in December 2020 as Brexit-related uncertainty increased in the run-up to the end of the transition period.

According to estate agents Knight Frank, average prices in central London fell 4.3% this year, while the annual decline narrowed to 3.2% in outer London areas after a monthly growth of 0.1%.

In the year following the EU referendum in June 2016, prices in prime central London spots fell 6.3%.

Homes in prime outer London — where there is a greater predominance of UK buyers — declined 1.9% in that same time period.

“Renewed uncertainty over Brexit means some buyers and sellers became more cautious in the final weeks of the year. As we saw after the EU referendum, this tends to have more of an impact in central London,” Tom Bill, head of UK residential research at Knight Frank said.

However, the estate agency predicts that any impact on central London properties from Brexit-related uncertainty, could be short-lived.

It forecast that price growth in prime central London will outperform mainstream UK and prime outer London markets in 2021 as a wave of pent-up overseas demand is released.

Brexit deals have taken a backseat as negotiations are ongoing between the UK and French governments to re-open the borders, amid continued lorry tailbacks and fears of disruption to food and medicine supplies from France’s blockade.

It comes as on Sunday and Monday several countries across the globe closed their borders on UK travellers and imposed stricter quarantine measures after a new, fast-spreading variant of the COVID-19 virus was found in Britain.

READ MORE: Need for more space amid COVID-19 sees housing demand soar 40% in 2020

Meanwhile, higher levels of supply and weaker demand continued to exert downwards pressure on rental values across prime London markets in the final month of 2020. Average rents finished the year down 11.9% in prime central London and 9.8% in prime outer London, Knight Frank said.

While sales were down, there was a rise in lettings.

Knight Franks says that the number of tenancies started in the week ending 12 December was 43% higher than the five-year average.

This is driven by the impact of the coronavirus pandemic, as tenants continue to seek more space to work from home and take advantage of falling rents.

Bill added: “The impact of this supply/demand imbalance had started to weaken over the summer but tougher lockdown measures in recent months, including a second national lockdown in November, pushed rental values down for second time this year.”

Central London has been “more impacted “than outer areas including south-west London, where a “stronger sales market means fewer rental properties” have come onto the market.

In 2020, there was a 3/2% decline in Wimbledon and 4.2% in Hampstead.

A separate study showed that the pandemic saw a 40% boost in housing demand across 2020 when compared to 2019, according to Zoopla’s House Price Index.

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