Thai investment in prime London markets up on weak pound
Average values across the prime London residential markets held their own in the second quarter of 2019 for the first time since the third quarter of 2015. While have prices continued to show falls on an annual basis, these have reduced to just -1.8%, less than half the level seen this time last year.
Quarterly price growth of +1.2% in the predominately domestic markets of prime south west London properties from Fulham through to Wimbledon, means this part of the market, unlike others, is showing modest annual price growth.
“This primarily reflects a shortage of stock, which has been particularly pronounced in this part of London,” says Prapaporn Boonkajornkul, head of International Residential Sales at Savills. “Some Savills south-west London agents tell us that a lack of stock is now the biggest constraint on their market, which has led to a narrowing of expectations between buyers and sellers.
“Across the prime London markets as a whole, we’ve seen the surprise return of competitive bidding. This results from relatively low stock levels and buyer commitment to securing the very best properties in a fragile marketplace.”
In the high-profile, high-value markets of prime central London prices fell by a further -0.9% in the quarter, resulting in year-on-year price falls of -3.6%, similar to the levels seen since the end of 2017.
This means that price falls across all prime central London value bands have now converged at around -20% below their peak of market 2014 levels.
“Traditionally that is an indicator that the market is close to full re-pricing,” says Prapaporn. “However, despite a currency play, which means that they are now 40-per-cent cheaper than in June of that year for a US dollar-based buyer, prime central London remains highly price sensitive in the light of ongoing political uncertainty.
“Indeed, in a survey conducted in mid-June, 90 per cent of Savills agents in central London named Brexit uncertainty as the single biggest challenge in this market.”
“Savills Five-year forecast predicts that higher level of global wealth will assist long-term demand with 12.4-per-cent growth anticipated over 5 years,” Prapaporn noted,
“There are a number of indicators for sellers to be more optimistic. But we face heightened uncertainty over what a new prime minister will mean for Brexit, the economy and, critically, tax policy, which suggests the prime markets will remain price sensitive across the remainder of 2019,” she added.
“We have already seen stamp duty reform raised by Boris Johnson and his supporters. While it remains to be seen whether a compelling case can be made for cuts at the top end of the market from a tax revenue perspective, such a move now seems more likely than it did under the previous administration.
“Sellers who hold out for a stamp duty cut to oil the market will need to weigh this against the risk of further disruption to the market that could result from a no-deal Brexit or the possibility of a higher tax environment in the event of a change of government.”
