What does Brexit mean for the prime residential market?

The outlook for the London and prime residential markets is far from certain. Housebuilder share prices, particularly those with a London focus, are down by more than 20%, but many are predicting an influx of investment.

They are positive about the Pound’s devaluation, which has made overpriced assets in London relatively cheap once again.

Fionnuala Earley, chief economist at Countrywide, said the agency – whose share price was down by over 20% – had seen offers today increase from European buyers because of the Pounds devaluation.

“The international buyer side, the depreciation in sterling, has created an opportunity to target residential property,” said Faisal Durrani, head of research at Cluttons. 

Figures released from Douglas & Gordon and D&G Asset Management show property values in London’s Emerging Prime areas are 20% cheaper in US$ terms than they were two years ago now that the value of the pound has fallen to $1.4.

On the other hand, those investors who have bought London assets have seen their gains from the last few years wiped out – particularly if they are US dollar investors.

“It’s not positive for those who are invested in the market at the moment. The deterioration in the value of Sterling overnight would have erased any gains over the last few years, compared to currencies pegged to the US dollar,” added Durrani.

“They will be waking up to see the price of the average London residential asset will have dropped by $100,000 dollars.”

Much will depend on if London continues to be seen as a safe haven for buyers. It is no secret that uncertainty has wiped out investment over the last six months as worries about the Brexit have increased. 

According to Durrani, London should retain its safe haven status, as most investors looking for the stability of real estate are in for the long term.

But the long term effects, according to most, were still too early to say.

Jonathan Hopper, managing director of Garrington Property Finders, said: “The blunt truth is that many investors – for whom property is a discretionary purchase – will sit on their hands until the dust settles. And no-one really knows how long that will take.”

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