Opinion: Sotheby’s International Realty UK’s Robin Paterson on the benefits of Brexit on the London housing market
In just four weeks the UK is already recovering from the ‘post Brexit dip’. We have seen the pound to euro exchange rate bounce back and we have seen our political dismay begin to correct itself with the welcome and surprisingly swift appointment of our new Prime Minister.
We cannot deny that, in the first 10 days after the news broke, the market was essentially paralysed with shock and uncertainty.
But since then we have heard of a number of deals being done with international buyers who had already identified their property ahead of the vote and chose to go ahead following the decision. Some of these buyers may very well have bought the property whether the vote was remain or leave, but uncertainty will always cause a market to stall.
It is important to highlight that regardless of Brexit, the peak of the residential market is very much behind us.
Sales activity and price growth in the prime London residential market have both slowed since mid-2014. As such, the EU referendum has been only one of a number of factors which have impacted the market. The UK election, the threat of a Mansion Tax, higher rates of stamp duty as well as the additional rate for investors and second home buyers have all contributed, along with Brexit, to dampen market sentiment.
Another positive that must be noted is that Brexit has brought a much needed focus to valuing properties accurately. Many London agents have increasingly felt pressure from vendors to value homes at prices far above market value. But following the vote we have seen a greater sense of realism from our vendors, we are seeing sellers finally being realistic on price which is essential to creating price corrections across the market. This is happening across the capital, with Johnny Turnbull reporting that over 80 per cent of the properties sold in Prime Central London in the second quarter of this year had price reductions.
Read more: The winners and losers of post-Brexit London property so far
Further price corrections will also be made due to predicted changes in buyer appetite from across the globe. We may very well see fewer European investors in the coming months, but we have already seen movement from our clients in Asia and the US.
Many would argue that the UK actually is a more attractive investment than ever before, having distanced ourselves from the increasingly fragmented European Union. As such, areas which are more reliant on EU buyers such as South Kensington and Angel may well see a price correction whilst others favoured by non-EU buyers will perform well. We should also see a change in the volume of transactions in these areas of the capital.
Brexit-aside, the real challenge facing property professionals now is the stamp duty changes. The London market simply cannot thrive without reform in this area. Now that Theresa May has formed her new cabinet she will be compiling a list of reforms and targets, in which housebuilding is sure to be among them.
I am sure many property professionals are holding their breath in the hope that stamp duty may come up on the agenda.