Letter from London
Sales volumes in London have been improving since last year. The weakness of the pound is contributing — US buyers currently benefit from an effective 20% discount when purchasing in the UK.
It will have been obvious from across the Atlantic that political uncertainty in the UK ticked up in June. This rise in risk followed a general election that produced no overall parliamentary majority and the formal start of talks to leave the European Union.
However, while both events will continue to attract headlines and influence the performance of the prime London property market to some degree, it is important not to overlook the underlying trends.
Sales volumes have been improving since the middle of last year as lower asking prices increasingly reflect the impact of higher rates of property purchase tax (stamp duty) and this decline in prices has boosted demand.
Indeed, there were 14% more transactions across the prime central London market between January and May this year compared to 2016 and 9% more than in 2015.
An analysis of the latest Knight Frank data suggests this improvement in activity will remain with us through the coming months. The number of prime central London properties under offer in May was the second highest monthly figure since the start of 2011. Meanwhile the number of new prospective buyers registered rose 15% in the first five months of this year compared to 2016 and the number of viewings rose 19% over the same period.
While prices declined 6.6% in the year to May, there has been a noticeable trend towards slower price falls. The three month rate of price change was -0.2% in May, which compares to a figure of -4.1% in December last year.
Furthermore, it is also worth remembering that the London property market as a whole is likely to be supported by ultra-low interest rates, despite the risk of higher inflation due to the weak pound, which should remain a fixture well into next year.
Meanwhile, the weak pound itself should provide some stimulus for the London market in the form of overseas investment. Compared to the period before the EU referendum, a US buyer benefits from an effective discount of 20% when currency and price movements are taken into account.
All of the above is worth bearing in mind the next time you read a Brexit headline.