Price cuts are failing to entice buyers to snap up luxury properties in London as investors sit on their hands until the Brexit decision is made.
The number of active buyers to available properties has halved over the last year, according to a new report by Knight Frank, the global real-estate consultancy, and even 10% price cuts aren’t having the desired impact.
“There has been a discernible “Brexit effect” on the UK economy as decisions are delayed and the London property market is no exception,” said Tom Bill, head of London residential research at Knight-Frank. “Buyers and sellers are postponing decisions because of the prospect of entering unchartered economic and political territory.”
As a result of waning demand, annual price growth for prime central London properties fell to 0.1% in May, the lowest rate since October 2009. Prices have grown just 2.4% over the last two years, and it has been since October 2012 when annual growth was last above 10% .
Properties near Hyde Park in central London saw the biggest drop of 4.8%, according to a Knight-Frank report released Tuesday. This was followed by a 4.6% fall in south Kensington and a 3.5% decrease in posh Chelsea.
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The referendum on Britain’s membership of the European Union, which will be held on June 23, is not the only factor at play, Knight Frank said. Demand has been waning ever since the U.K. government slapped higher stamp duty rates on more expensive homes in December 2014. The market then took another hit in April when an additional 3% stamp duty surcharge for rental investors and second-home buyers was introduced.
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However, Knight Frank believes that there are signs that underlying demand is strengthening. Viewings increased 31% between January and April versus the same period last year, suggesting a degree of pent-up demand.