Outlook for London Property Market Falters

While there are signs that summer activity in the UK-wide housing market is performing in line with the usual seasonal moves, London property may not be faring quite so well. And, it’s not just summer activity levels that have been hit by Brexit, the outlook ahead remains weak with a number of investment banks and economists reducing their valuations and forecasts.

“London’s strength has become its Achilles heel following the EU referendum,” said Newington Green estate agent, M&M Properties. “Until some clarity around the future for London’s financial services sector is achieved uncertainty over its property market and associated values will continue to suffer.”

The problem for the London property market – both residential and commercial – is its position as a hub for international investment and as a financial services centre. A number of studies, reports and analysis from a range of bodies and economists highlight this as a potentially damaging factor.

At the moment it appears that the only way London’s property market will regain confidence and ground is if the eventual Brexit negotiations can safeguard the elements that are key to a thriving global financial services centre and international investment safe haven.

“Prime Minister Theresa May’s goals and negotiating skills will become extremely important when the decision to invoke article 50 is made,” said central London estate agent, LDG. “How long those discussions take however, is anyone’s guess as trade negotiations in particular tend to be drawn out affairs with each party working hard to secure the best deal they can.”

Another sign of lower confidence in the  London property market comes in the form of luxury estate agency Foxton’s half-yearly results for 2016. The company said operating profits in the first half of this year were £10.5 million, 42% down on the same period a year ago.

In its results report, the estate agency’s chief executive officer (CEO) Nic Budden laid the blame behind the slowdown in profits squarely at the feet of the EU referendum, adding he expected the Brexit-related uncertainty to continue.

“The result of the referendum to leave Europe is likely to lead to a prolonged period of further uncertainty and we do not expect London residential property sales markets to show signs of recovery before the end of the year,” Budden said.

The list of firms and experts who have cut their expectations and/or valuations for London property goes on. Property developer Derwent has cut its London office market rental forecast to 1-5% from 5-8% previously.  The reason? You guessed it!

Chief executive John Burns explained to investors that the company was preparing for the worst but hoping for something a little better. “I think perhaps we are a bit too cautious because things are going well,” Burns said. “We’d far rather surprise with an upside rather than a downside.”

The London property market, be it anywhere in the commercial and office space or residential, is big business for investors, so it’s no real surprise to see the high level of caution over values and returns.

“Investors and markets simply don’t like uncertainty, so to see so many downgrades and re-valuations was only to be expected once the result of the referendum was announced,” Denhan Guaranteed Rent said. “Given London’s popularity with tourists and businesses alike though, there’s a real possibility that once more is known about the future for the country, it will regain its crown as a property investment safe-haven.”

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