It’s not the easiest market in which to be marketing prime residential luxury property. Together with the Brexit chaos, recent media reports around prime London residential house prices “stagnating” have fuelled negative sentiment. However, there are still strong positive messages that we believe should be pushed out to counterbalance some of the headline-grabbing gloom.
1. Not all prime is the same. Identikit, mass market flats will be hardest hit. We are still in a market flooded by the excesses of 2014, where people were just building prime and assuming it would sell and not really worrying about quality. More bespoke, uniquely designed homes will be less affected as customers look for that extra something.
2. Super prime pricing, especially in the London property market, has now hit a floor, with the reductions of the last few years making it both cheaper and more attractive. Headline figures for all prime property disguise a very diverse market where some areas are now performing far better than others.
3. Pricing only changes substantially if there is a push factor – i.e. banks calling in development loans and sales being forced through at lower prices. This is more likely as we go forward, particularly with bridging loans where there has been a degree of extend and pretend which cannot continue, but is not as pressing as some people like to think. In reality, there is little benefit in developers cutting all their margins to repay banks and what most banks do not want is to be holding the keys to assets as fire-selling becomes a self-perpetuating cycle.
4. Brexit is not all doom and gloom. Currency devaluations make assets comparatively cheaper, while the UK’s reputation as a safe and transparent market remains. That said, some quick clarity would be welcomed, as at the moment some overseas buyers are holding off in case of another currency devaluation.
5. Market corrections are not always a disaster. Provided developers have bought sensibly and priced correctly, they are a hindrance but a routine part of the property market and accounted for accordingly. There have been four in the last 30 years; there will likely be another four in the next 30.