The upmarket attractions of Mayfair, Knightsbridge and Belgravia have helped London be named the number one destination on earth.
The top rating on TripAdvisor – the world’s largest travel website – was awarded following analysis of millions of visitor reviews of restaurants, hotels and tourist attractions, including Harrods and St Peter’s Church in Eaton Square.
But as Britain prepares to vote on whether to remain in the European Union, a greater concern for home owners in Belgravia and other areas of prime central London is the effect on property values the result of the referendum on 23 June could have.
Eurosceptics argue that if Britain votes to end its 43-year membership of the EU it will cut immigration, save the taxpayer billions of pounds and free us from an economic burden.
On the other hand, Europhiles say if the much talked about Brexit does take place it would cause the stock market to fall through the floor and an economic recession, with losses to GDP calculated by the Centre for Economic Performance at up to 9.5% – worse than the 2008 financial crisis that saw property prices fall by more than 13%.
Buckingham Palace insists the Queen is “politically neutral” over the EU referendum.
As Belgravia’s oldest residential estate agent that has been setting local price records for more than a century, Best Gapp takes a similar stance to Her Majesty.
A recent online survey found that 55% of people believe leaving the EU would have an impact on the value of their home, with 34% thinking it could increase property prices and 21% fearing it could lead to lower sale prices.
Only one member state has ever left the 28-nation EU since Belgium, France, Italy, Luxembourg, the Netherlands and West Germany established the European Economic Community in 1958.
As a part of Denmark, Greenland joined the EEC in 1973. After home rule for Greenland began in 1979, the territory voted to leave the EEC in 1982 and its exit was agreed in 1985 following lengthy negotiations over fishing rights that resulted in the Greenland Treaty of 1984.
But as a member of the Association of the Overseas Countries and Territories of the European Union, Greenland remains subject to EU treaties.
In theory, Britain could leave the EU in a single day by repealing the European Communities Act 1972 and its numerous modifications and amendments.
However, Article 50 of the 2009 Lisbon Treaty – the document that governs membership of the EU – states that any country wanting to leave the EU must negotiate with the 27 other member states about the terms of its withdrawal.
The Lisbon Treaty allows member states up to two years to come to an exit agreement or face leaving without securing a free trade agreement or any other benefits EU membership brings.
A government report on the process for withdrawing from the EU, which was released in February, acknowledges that “uncertainty during the negotiating period could have an impact on financial markets, investment and the value of the pound, and as a consequence on the wider economy and jobs”.
But Article 50 of the Lisbon Treaty has never been put to the test, so we can only speculate about the effects of this uncertainty.
The nearest point of reference is the Scottish referendum, which hit the luxury end of the property market north of the border particularly hard.
In August 2014 – the month before Scots voted on their future – the number of property sales in Scotland was 8% lower than the typical seasonal trend.
In a similar way that the run-up to a general election often puts the property market on hold, the aftermath of the referendum could do the same if we vote to leave the EU.
But just as the property market in prime central London got back into full swing the day after David Cameron’s election victory in 2015, the UK’s status within the EU is unlikely to have any long-term effects.
Why? In macroeconomic terms, EU membership is virtually irrelevant for the UK.
This is because we are both an economic powerhouse and the value of sterling is not tied to the euro, according to Financial Times columnist Wolfgang Münchau.
He goes on to explain that the EU budget is tiny when compared with the UK government’s other fixed costs and free trade and free capital movement is highly likely to continue whether Britain leaves the EU or not.
It’s not unreasonable to say the greatest threat to property values that Brexit poses is the two-year period Britain would need to negotiate the terms of its departure from the EU.
Those 24 months would create a climate of uncertainty, which could well have a dampening effect on the property market in Belgravia, Knightsbridge, Kensington and Chelsea.
The weakening value of the pound, caused in most part by speculation over Brexit, is already taking place.
In March 2015, £1 was worth over €1.41. Today, it’s worth closer to €1.25.
But there is a bright side. The falling value of the pound makes property in prime central London significantly less expensive for overseas investors.
It is equally possible, therefore, that in sought-after areas of London, such as North Belgravia – where the value of a house has risen 37.3% over the past five years – investors from the Eurozone will keep the property market buoyant as they seek to take advantage of their currency’s strength against the pound.
Nor will Brexit alter the fact that London has been attracting investment since Best Gapp was established in 1900.
How much is your property worth? Contact the valuations team at Best Gapp for an up to date valuation of your home’s rental and sales value.