Following the referendum results, buyers are trying to work out what Brexit will mean for them – but I'm not sure anyone has a definitive answer to that yet.
I have watched with interest the commentary from the selling agents and developers, promising a wall of dollar and euro-based cash heading for the London market. Maybe these are the same people who thought the market was going to go wild post-general election.
Yes, our international clients are taking an interest, and of course the vultures are circling, but most are interested because they see our economy, politics and market as a Brexit-induced car crash from which they can salvage a massive discount in addition to their currency advantage. There are not many desperate sellers right now, so it will be hard to satisfy the opportunists.
The truth about the London market is that we had already witnessed a massive drop off in transaction volumes caused by the various tax changes and general sense of wariness which has pervaded the market. Buying property in the capital is an unbelievably expensive past time and you had to have a pretty compelling practical reason to be a buyer over the last year. These are people who are trading up, trading down, too many children, getting divorced…these are not discretionary buyers, and they will still be there when the dust settles.
A number of our clients have asked us to hold fire while they gauge the lie of the land, but the majority are continuing with their search – albeit cautiously.
What does Brexit mean, in terms of values? It’s way too early to say. We had a number of deals ongoing last week, and in each case we have discussed the arguments for renegotiation. Some buyers who were paying a very full price on the assumption that we would remain in the European Union have asked us to drop their offers, but with nothing but sentiment to use as argument, these have not been easy renegotiations.
Values of prime central London property have been remarkably resilient over the last year or so, in spite of the drop off in buyers. This is because supply has also dwindled, creating a balance. I expect supply will remain low while transaction costs are high, while low interest rates means there’s not much point sitting on cash.
The exception to this is the new build development market, where supply is plentiful, and where the audience of buyers tends to be more of the discretionary/investment type. The currency advantage should help the developers, but the headwinds will be strong.
This is where quality counts and the worst built will suffer the most – as we’ve seen over the past week – with the weakest and worst located schemes forced to make dramatic price reductions.