Samir Salya discusses London luxury property prices

Brexit uncertainty, along with tax changes introduced by the government will lead to a fall in prices of luxury homes in central London, according to Savills.

The property experts forecast that the market will remain fragile among all of the uncertainty, and that the prices will fall 4% by the end of 2017. Further, Savills says that the prices will then stay flat for around two years as the ongoing complexity of Brexit continues to affect the market.

When will prices recover?

Following the fall this year, Savills predicts that prices will begin to recover towards the latter half of 2019. By then they should have risen 2%, with a further rise of 8% in 2020. This effectively means that the recovery will take a full year longer than previously predicted by the firm.

Head of UK residential research at Savills says: “Uncertainty fuelled by Brexit and a weakened government mandate since the June election means sentiment is fragile.”

During the first nine months of 2017, prices in central London fell by 3.2%. They are now 15.2% lower than when they were at their highest in 2014. Sellers have been forced to drop their prices in increasing numbers.

Five-year forecast

Savills predicts a 20% growth in luxury housing prices in central London over the next five years. This is less than half of the long-term average of 52% that we have seen from 1979 to 2014.

This means that London’s luxury property market has matured. The growth is slower and is unlikely to reach its previous heights again. Other contributory factors include the wider exposure to capital gains tax for overseas investors and the changes in inheritance tax, as well as increases in stamp duty.

London will remain key

While Savills predicts the city will lose around 20,000 jobs from its 350,000 strong workforce due to Brexit, London will still be a key financial centre for the world. They also think that it will develop as one of the main European technology hubs.

In 2016 there were about 394,000 properties in the UK that were valued at more than £1 million. This was down by 3.4% on 2015’s numbers, but overall had more than doubled since 2006. Around two-thirds of these high value homes are in London and another 21% are in the south east of England. Kensington and Chelsea in the fashionable west London area is home to almost half of all the private residences that are worth more than a million.

Exodus from capital

Outside of the very expensive homes at the top of the market, over-valued London property has meant there has been an exodus of people from the capital city. The number of people over 30 moving away from London in search of a better valued home has risen almost 30% since 2011.

This is likely to have a knock-on effect of raising housing prices in the commuter belt. This refers to the area around 30-60 minutes outside of the capital, and it’s likely that the average house price here will rise by 15% over the next five years.

About Samir Salya

Samir Salya is the Chairman of Reign Holdings, and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing