UK property market feels Brexit gloom but top-end buyers unruffled
While London market cools, buyers from Saudi Arabia and Russia seem undeterred by the continuing EU divorce saga
Every year, estate agency owner Tim Ferris sends out an email to the landlords of the 350 properties he manages to tell them his predictions for the property market in the coming 12 months.
“I always try and be a little upbeat,” Mr Ferris told The National. “But this year it is very difficult.”
In the affluent south-east of Britain where house prices have been rising rapidly over the past few years, an impending downturn is on the horizon.
“Every agent I’ve spoken to says the housing market in the next 12 to 24 months will be either dead flat or down,” Mr Ferris added.
The average price of a property nationally in September was £232,554 (Dh1 million), an increase of 3.5 per cent compared with the previous year, according to official figures.
But in London, where the average house price has almost doubled since the 2008 financial crash, a cooling in the property market has already begun.
In parts of the British capital, the location of some of the most expensive properties in the world, house prices fell 0.3 per cent in the year to September 2018.
For property analysts, the London dip is a forewarning of tough times ahead for the rest of the country.
Henry Pryor, an independent luxury property buying agent who famously predicted the last property market downturn in 2007, said he believed house prices would be down 5 per cent by the end of 2019.
“I think that turnover will remain but the market will start to change more widely across the UK,” he told The National.
“I suspect that what we see happening in London and the south-east in 2018 will roll out into the rest of the country through 2019 and 2020.”
Estate agents have been reporting a decrease in the number of viewings per property as well as the number of transactions, indicating a lack of buyers.
While not the only factor, Brexit uncertainty and the volatility of the pound are making many potential buyers sit out.
Andy Soloman is the founder of Yomdel, a company that provides live chat services to more than 2,000 estate agency offices across the country. He told The National that questions over what will happen to the economy and the housing market post-March 29, 2019, the date the UK is set to leave the EU, were making consumers reticent to buy. And those that do take the risk are expecting big discounts.
“When we talk to our clients, there’s a lot of uncertainty over what the future holds,” he said. “The only thing that is clear is that absolutely nothing is clear. The crystal ball is clearly cracked.”
In December, the Bank of England governor repeated a warning he gave in September, that a no-deal Brexit could lead to house prices slumping by as much as a third over three years.
The uncertainty is worrying both domestic and overseas buyers. While the weak pound might seem like an attractive prospect for a foreign buyer, a big return on an investment by speculating on property is no longer the guarantee it once was.
In London, the luxury end of the market is saturated. More than half of the 1,900 apartments built in 2017 and priced at more than £1,500 per square foot remain unsold, according to data by Molior London.
The prospect of a Labour government coming to power led by Jeremy Corbyn, who might introduce a wealth tax, is worrying some of Mr Pryor’s overseas clients.
“All of the main political parties are exploring ways of taxing wealth rather than income. The most visible of that wealth is property,” the buying agent said.
As well as political changes, financial changes in the way property is bought and sold is making foreign buyers even more nervous.
Alongside changes to Stamp Duty - a tax paid when purchasing a property - a new policy that can compel someone by court order to reveal sources of unexplained wealth has made the house-buying process more transparent. Incorporated into UK law in January 2018 as part of the Criminal Finances Act 2017, an unexplained wealth order is a type of court order issued by a British court.
Although buyers might not have anything to hide, this change is making shy outside investors look elsewhere for a more straightforward purchase.
Striking a rather more optimistic note, Trevor Abrahmsohn, whose Hampstead estate agency Glentree Estates sells around 10 to 15 per cent of all luxury property in London, said he had sold £381 million worth of property in the past two years, 50 per cent of which had been directly attributable to the drop in the pound.
He added that buyers from Saudi Arabia and Russia, who purchase the majority of his top-priced properties, had shown they were undeterred by the ongoing Brexit saga.
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“The London property market will always be attractive. Property over time has been shown to be the greatest investment, greater than the stock market, gold, cash and bonds,” Mr Abrahmsohn said.
For Mr Ferris, who opened his business in Kent in 1982, a dip in the property market is nothing new. He is waiting to see how the Brexit negotiations play out to see how bad this particular downturn will be.
“People will always have to move house because of death, divorce, job changes, family expansion but the moves that aren’t necessity are being held off,” he said.
“Everybody is waiting until March 29, 2019 to see if there is a Brexit agreement or not. I’m not expecting anything to happen until that date.”
Updated: December 24, 2018 02:33 PM