‘Brexit’ Concerns Dampen Demand for London’s Luxury Homes

Many investors are holding off from buying high-end London property ahead of the crucial Brexit decision. While U.K. voters won’t decide on whether Britain should leave the European Union until June 23, ongoing uncertainty is delaying investment decisions—including those in real estate—until after the referendum, according to a new report by Knight Frank, a global real estate consultancy. Tom Bill, head of London residential research at Knight Frank, said, “Buyers have adopted a wait-and-see approach as the negative headlines in the business pages combine with domestic political uncertainty in the shape of a London Mayoral election in May and an EU referendum in June.” London’s high-end housing market has already been hurt by higher stamp duty rates introduced in December 2014 as well as the slowdown in China. And it’s about to be hit again, when an additional 3% stamp duty surcharge for rental investors and second-home buyers takes effect in April. As a result of this waning demand, average house prices in London’s most expensive boroughs fell by 0.6% in the six months to February—the weakest performance since June 2009. Annual house price growth eased to 1% in February, as prices fell -0.1% from the previous month. Knightsbridge, home to Harrods department store and traditionally one of the most desired locations among foreign investors, fared the worst. The district saw prices fall by an average of 7% over the last year. This was followed by South Kensington and Chelsea, where prices slumped 3.3% and 2.1% respectively. However, despite evidence of falling prices, a separate report from Wetherell, a London-based estate agent, predicted that the £1 million submarket in Mayfair and the wider West End will become extinct in the next 12-24 months. Less than 5% of homes now sold in Mayfair are priced below seven figures. According to the report, this reflects an increase in new super-luxury apartments being built and sold in Mayfair over the last few years.