The luxury property market in the UK is gradually recovering following the shock of Britain voting to leave the EU, according to one of the country’s leading property agents.
Knight Frank said the number of exchanges agreed on homes worth more than £750,000 was down 20% on last year since the referendum, while the value of commercial property sales in July and August was 47% down on 2015.
However, Alistair Elliott, the senior partner and chairman of Knight Frank, said the aftermath of the Brexit vote had been “less dramatic than feared”. Apple recently gave a major boost to the London property market by signing up for 500,000 sq ft of new office space at Battersea power station, while the number of prospective buyers registering their interest in prime residential property in the UK was higher in July and August than in 2015.
“In the first half of this year, UK markets became distracted by the looming EU referendum,” Elliott said. “Nonetheless, the fundamentals remain strong and the immediate aftermath of the Brexit vote has been less dramatic than feared. Volumes and prices, especially in the residential sector, are down but activity is gradually recovering.”
Elliott said property in the UK looks attractive despite the referendum result, with the slump in the value of sterling lowering the price for international investors and low interest rates meaning that property offers higher potential annual returns than other assets such as bonds.
Despite the 20% drop in prime residential property deals, Knight Frank reported that the number of offers being made on properties is only 6% lower than last year with those accepted 6% higher. The number of prospective buyers has also risen.
Elliott said this was likely to lead to an improvement in sales volumes in the final quarter of 2016, although the market is still likely to be smaller than last year due to factors unrelated to Brexit, such as the government introducing a higher rate of stamp duty on prime properties and second homes.
Sadiq Khan, the new mayor of London, has warned of a clampdown on overseas buyers of property, but Elliott lent his support to the former Labour MP. “London needs a balanced housing market and more supply,” Elliott said. “He is committed to building more homes – that is good news.”
In the commercial market, the Knight Frank boss said companies were hesitant about signing up for new office space, particularly in the City, although 24 of the 31 deals above 20,000 sq ft that the agent had been tracking in central London have been completed.
Knight Frank, whose clients include Google, reported a 4% increase in annual revenues to £461m but a 5% drop in profits to £153m. Its 550 partners will share a bonus of £84m, up from £80m last year, on the back of the results.
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