Back in 2017, a report by UK estate agents Savills forecasted no change in London property prices during 2019, but did expect a boost of 5% by 2020 after the UK had left the EU.
However, with little certainly over Brexit, an incoming Prime Minister with only a slim majority and the likelihood of a general election in 2019 increasing, many property experts are now predicting a continuation of the current status quo.
In fact, some experts are now predicting a fall in average London house prices of 2% during 2019, and forecast no growth at all in 2020. Once prices do start to rise in 2021, they expect only a modest growth rate of 2.5%, or just half of the figure previously predicted.
The property price experts arrived at these figures because of the lack of uncertainty over the result of the Brexit negotiations. Whether the UK gets a deal or leaves without a deal is considered less important than the continuing uncertainty we have now.
Savills’ 2017 forecasts were made under the assumption of the negotiations being finished one way or another by March 2019. This obviously has not happened, and the final outcome of Brexit is still very much open to speculation.
Longer term prospects
Savills forecast that London property prices will rise, with an average increase over the next 5 years of 4.5%. However, while they expect a bounce in property values post-Brexit, they now predict that growth will be lower than they had previously predicted.
Other leading estate agents (including the online estate agent Yopa) are broadly in agreement with this forecast. London estate agents Jackson-Stops is finding that many prospective London-based buyers and sellers are putting off making big decisions before any firm agreements regarding Brexit have been arrived at.
While they expect to see property transactions increase after Brexit, unless the UK leaves with a catastrophic no-deal that leads to a recession, they reiterate that stability – both economic and political – is one of the most important factors guiding decisions about the sale and purchase of central London property.
Property hotspots within London
The areas tipped to have the highest rates of house price growth in the long term are those with infrastructure improvements in the pipeline. For example, outlying areas served by Crossrail will see journey times into central London shortened and will benefit from more frequent services.
If you are planning for the longer term, proposed infrastructure projects such as the Bakerloo line extension in south-east London and Crossrail stations between south-west and north London should make property in these locations an excellent investment.
Affordability is still an issue
With house prices in the capital rocketing by 70% over the past decade, affordability for London buyers is stretched to the limit, even with the recent cooling of the market. This, in turn, makes mortgage lenders cautious about lending to buyers whose finances are under pressure.
Although the differential between London property values and those across the rest of the country has narrowed slightly in the past few years, many expect it to widen again over the longer term.
Sign up to our newsletter to get the latest from Business Advice.