Prices in London’s luxury housing market slumped by almost 7% over the last year amid sky-high stamp duty rates and Brexit uncertainty, but sellers might have reason for optimism.
The average cost of a high-end home in prime central London fell 6.4% in the year to March, according to global real estate consultancy Knight Frank’s latest health check of the market released Monday.
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However, in a sign that price falls could be bottoming out, quarterly growth climbed to -0.1% in the first quarter of the year compared with the previous three months, the highest level since May 2016.
"Trends in price growth in central London are pointing towards an end to the falls we saw in 2016," said Tom Bill, head of London residential research at Knight Frank.
"This stabilization process began in the last quarter of 2016 following a lull in transaction activity in the middle of last year," Mr. Bill said.
This has been driven by demand starting to pick up as sellers factor stamp duty costs into their asking prices and foreign buyers continue to benefit from currency savings thanks to a Brexit-induced weak pound.
As a result, Knight Frank witnessed a 13% annual rise in exchanges across its businesses. Meanwhile, the total number of £20 million-plus (over US$24.95 million) deals recorded in the first quarter of 2017 was last exceeded in the last quarter of 2014, a period that experienced a rush of deals ahead of a stamp duty hike.
Knight Frank is predicting that house prices will be flat in 2017, although it stressed that the wider political background remains uncertain as formal Brexit discussions get underway.
Its separate analysis of London’s rental market found that demand in the super-prime lettings market above £5,000-plus per week remains robust. There were twice as many deals done above £5,000 (US$6,239)per week in the first two months on 2017 compared to last year.
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Some people have been choosing to rent as they adopt a "wait-and-see mode" to see if house prices will fall further in these neighborhoods.