There is no doubt that Brexit was unsettling, yet the economy has surprised to date and many commentators are optimistic that the UK can forge a new way forward with a range of global trade partners. Political threats in Europe may actually strengthen London’s position in the world, reinforcing its long-held safe haven appeal.
Preserving London’s highly-valued international banking and finance sector is critical to a successful post-Brexit UK and protecting passporting rights is central to the negotiations. London has remained at the top of the Global Financial Centres Index since 1997 and its continuing status is crucial to the outlook for London's residential markets.
Prices are likely to remain relatively stable in prime central London for the rest of 2017. There does seem to be a general consensus that the downward pressure has eased now that most vendors have been persuaded to concede over-ambitious prices and most developers have already adjusted their expectations. There is little urgency for domestic buyers as long as prices remain flat. For overseas buyers, the circumstances may be different.
Forecasting currency movements is fraught with difficulties, but given that sterling is at a historic low, it is expected to strengthen as Brexit negotiations progress. Some economists are already predicting a return to $1.32 or more within 12 months.
At $1.32, the additional cost of a £10 million home to a dollar denominated purchaser, compared to today, would be $808,000. At $1.38, the additional cost would be $1,408,000. There are no certainties but it would be galling for overseas investors to look back on this period of weak sterling and realise it was a missed window of opportunity.
Many in the industry are calling for a reprieve on stamp duty to boost turnover but few are holding their breath. The top of each market cycle and bottom of each market cycle is hard to pick until you are past the inflection point! However, on the basis that consecutive price reductions have stopped, walk-in enquiry has measurably increased and houses on the market for two years are now going under offer across all price brackets, we are calling the bottom of the market in April 2017 within prime Central London.
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