After three years of falling prices, signs finally point toward the bottoming out of prime central London housing values, but prices in outer prime London markets—especially those in the southwest of the city—are next in line to feel the pressure, according to a report Tuesday by U.K. property expert Savills.
For the first time since June 2012, prices in prime southwest London fell further than those in prime central London, the report said.
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Values in the capital’s priciest central locations fell 0.9% in the last quarter of 2017, but for the year decreased 4%. Though values are, on average, 15.9% below their 2014 peak, the rate of price decreases has slowed and values are now leveling, the report said.
In prime southwest London—an area encompassing the neighborhoods of Battersea, Clapham, Wandsworth, Fulham, Barnes and Richmond—values fell by an average of 1.6% in the last three months of 2017 and a total of 4.2% for the year, making it London’s weakest prime market segment, according to Savills.
Fulham—which traditionally behaves more in line with its central London neighbors—recorded the largest falls in the submarket. Prices fell by a total of 4.6% in 2017 and are down 14.4% since the 2014 peak.
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"The prime central London market may be bottoming out, but we don’t expect a return to growth until there’s greater clarity regarding the Brexit process," said Lucian Cook, Savills head of residential research, in the report.
"We expect continued weakness in price performance in key outer prime London markets, and are forecasting small falls [this year]. These markets are much more dependent on domestic wealth generation and access to borrowing than prime central London," Mr. Cook said. "As such, our forecasts are for much more modest house price growth over the next five years."