Whilst activity in the sales market has been subdued due to stamp duty reform and post-Brexit uncertainty, the rental market has been buoyant throughout the summer months. Rental values have come down as levels of stock have increased with more properties coming from the sales market, and as a result landlords have reduced their asking prices to prevent any void periods. The weaker pound has also resulted in increased demand for higher end properties in comparison to the same period last year.
In the sales market the outlook has improved with the sharp depreciation in Sterling making Prime Central London far more attractive to overseas buyers. The rapid appointment of the new Prime Minister also served to calm the uncertainty of the post-Brexit market and the cut in interest rates to 0.25% has benefited domestic buyers as low interest rates look set to remain lower for longer.
The market has been adversely affected by the introduction of the additional Stamp Duty levy of 3% on second homes and buy to let properties which came into force on 1st April and the EU Referendum putting the brake on price growth and transaction volumes. Transaction levels fell by 42% in the second quarter of 2016 in Prime Central London compared to the same period the previous year as buyers deferred making any decision until after the outcome of the referendum.
Whilst it is too early to predict the outcome of the vote to leave the EU the analysts’ predictions of a post-Brexit recession have been confounded by positive economic data showing consumer spending to be strong and unemployment to be low holding at an 11 year low of 4.9%, and the weaker pound has also served to boost exports.
Since the Brexit vote sellers have become more aware that sensible pricing is necessary in this challenging market and coupled with the weaker pound this has boosted activity from foreign buyers from China, India, the Middle-East and Russia. It is too early to draw any conclusions as the Prime Minister embarks on negotiating the complex terms of the departure from the EU but foreign buyers could certainly be the catalyst needed shore up the Prime Central London market.
According to NBD’s latest Dubai Real Estate Tracker survey the pace of price declines has slowed in the 3 months to October. In the 3rd qtr the new buyer enquiry index for apartments rose to 50.0 from 37.8 whilst the index for villas rose to 38.6 from 25.7. Interest from international buyers has also improved with 25% of agents reporting increased enquiries from new buyers up from 14.6% in the 3 months to August.
According to Cluttons a bottoming out in the market is likely to happen by the end of 2016. CEO of Cluttons Middle East, Steven Morgan stated that: ‘We’ve seen the popularity of off-plan property sales persist, partly fuelled by the fact that off-plan residential property prices are 20 to 30% lower than completed secondary stock, which in essence might allow buyers to bypass some of the stringent lending criteria and also possibly avoid the need for a mortgage altogether.’
Knight Frank forecast a gradual recovery in 2017 however further volatility in oil prices, the US Presidential elections, and on-going geopolitical tensions are likely to impact the behaviour of currencies, investor sentiment and consequently the demand for property.
South of France
According to Savills ultra prime markets in world cities are cooling following a period of sustained price rises and the French Riviera is poised to benefit from this trend.
The Riviera offers some world class ‘trophy’ properties but is also attracting those looking for an investment opportunity; demand for short term rentals in the super prime areas is such that it is possible to cover running costs by renting out such properties for just a few weeks of the year.
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