House prices in prime London locations have fallen 1.5% in the year up to July — but Brexit has little to do with it, according to property agent Knight Frank.
Knight Frank said in its July report into the London prime property market that though the uncertainty surrounding Brexit made the capital’s prime property market a bit more volatile, the introduction of a higher rate of stamp duty on second homes in April had a far bigger impact.
“This slowdown was a natural consequence of strong price rises between 2009 and 2013, however the process was accelerated by two stamp duty increases and a series of other tax measures, ” said Tom Bill, head of London residential research at Knight Frank.
He added that sellers had naturally come to realisation in the last two years that their prices were higher than they should be, and that the summer had seen a readjustment since the increased second-home stamp duty:
“Despite the widespread media coverage devoted to the EU referendum and its potential impact on house prices, the primary factor curbing demand in prime central London remains stamp duty. Had the result of the referendum been a victory for ‘Remain’, it is likely there would have been a similar mismatch between expectations and reality that followed the 2015 general election.”
In fact, Brexit may have even increased buying activity in certain expensive London hotspots even if prices had fallen, with Belgravia and Knightsbridge seeing a “pick up” in activity thanks to falling pound encouraging sales to foreigners. Viewings in June 2016 for prime properties increased by over 40% compared to the same month last year.
The uncertainty following the Brexit vote result may have also affected the nature of how people choose to buy a house, according to Hill, with location now less important than the property’s intrinsic quality:
“The referendum has also brought pre-existing dynamics into sharper relief in the new-build market. Price-sensitive buyers have been increasingly driven by the quality of developments and amenities over a desire to buy in a specific London neighbourhood.”
Despite Knight Frank’s optimism, most analysts still think Brexit will be disastrous for the UK’s overall economy, with some saying the vote will cause a “contagion” in many industries resulting in a recession.