A property economist is warning that the relatively strong pound, global economic turmoil, the free-falling oil price and tax increases for high-value homes could paralyse the top end of London’s housing market in 2016.
Hansen Lu, a property economist at independent research company Capital Economics, claims the outlook for prime central London housing is “lacklustre” and “prices in the most expensive parts of the capital will struggle to do more than mark time” during 2016.
But a shortage of homes for sale in prime central London means demand for property remains high.
“The Middle East seems to have weathered low oil prices surprisingly well so far,” say Lu.
“But while we are comparatively optimistic about the Chinese economy, Beijing’s desire to stem capital outflows from the country through stronger capital controls may increasingly hinder prospective buyers.”
In the five most expensive central London boroughs, house prices fell be an average of 8.7% in the year to December 2015, according to one source.
However, the Office for National Statistics says the average house price across the whole of London rose 9.8% to £537,000 in the 12 months to November 2015.
Intense demand from foreign investors at the top end of the market is also putting heavy pressure on an inadequate housing supply in London.
However, Lu concludes: “All in all, our indicators of PCL demand look weak, which suggests that prime house prices are more likely to stagnate in 2016 than to rise.”
This means anybody selling a property in prime central London over the next year is likely to profit from price rises in previous year without missing out on further gains in residential values.
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