London prime property market in the referendum doldrums

The prime property market in London has become beset by "lethargy" because of the uncertainty ahead of the outcome of this month's referendum on the UK's membership of the EU, according to the latest Knight Frank analysis.

London residential property
Annualised price growth slowed to 0.1 per cent last month, the lowest rate since October 2009, Knight Frank reported, with the ratio of active buyers to available properties being halved over the past year.Tom Bill, Knight Frank's head of London residential research, said, “The market has become price-sensitive due to higher levels of stamp duty, but an indication of the Brexit effect is that demand in May has remained subdued even for properties where asking prices have fallen by 10 per cent or more. Demand was already more restrained as a result of the impact of two stamp duty increases in the space of 18 months.”“However, despite the looming referendum, there are signs underlying demand is strengthening as buyers drop asking prices to reflect higher transaction costs. The number of transactions between January and mid-May was flat this year compared to 2015. Meanwhile, viewings increased 31 per cent between January and April versus last year, suggesting a degree of pent-up demand.”Outside London, however, the prime market for country houses in the UK has seen a busy start to 2016, although "one of the key questions for the market is whether this momentum will be maintained for the remainder of this year", according to a separate Knight Frank report. “The country house market continues to feel the impact of the increased cost of stamp duty. This remains a barrier to both price growth and activity at the top end of the market.”The estate agents reported that prime country house prices rose by 2.4 per cent over the year to March and, while prices remained on average 13.6 per cent below 2007 levels, "there are notable variations dependent on property type, location and price.”The report also found that a growing number of Londoners were moving from the capital for prime regional markets.Oliver Knight, a Knight Frank researcher, said, “Since the financial crisis there has been a growing trend towards living within thriving towns and cities other than London. This has resulted in prime urban properties out-performing their rural counterparts across the UK.”"Demand is strong in these locations, in part due to the high concentration of prime housing stock and good schools which make them attractive to families looking to upsize, but also thanks to a growing number of equity-rich downsizers looking to move to areas where they can have access to a range of good restaurants, shops and amenities.”“Costs are greatest in markets on the outskirts of the capital such as Elmbridge, St Albans and Guildford – perhaps unsurprisingly given average property prices tend to be higher in such locations. These markets have also been among the first to reap the benefits of the ripple effect of demand coming out of London. As regional economies continue to recover, more London buyers are expected to make this move.”

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