Stability Returns to Prime Central London Despite Uncertain Political Backdrop

The primary driver for this trend is the fact vendors are increasingly reflecting higher transaction costs in their asking prices, which is narrowing the gap with buyer expectations.

In some instances the EU referendum was the catalyst for overdue price reductions. While Brexit and Donald Trump dominate the wider political and economic landscape, it would be wrong to overstate their impact on the prime London property market.

Higher rates of stamp duty is still a bigger issue than the prospect of article 50 being triggered in March. Improved trading conditions meant Knight Frank undertook more exchanges in the fourth quarter of 2016 than in 2015 or 2014. In a sign this trend has carried over into 2017, the number of Knight Frank exchanges in January was higher than in the same month in the previous two years and was comfortably ahead of the ten-year average for January.

Conversely, the number of exchanges between January and September 2016 was 20.6% down on the same period in 2015. There are further signs of a strengthening market. While the number of new prospective buyers was 6% higher year-on-year between January and September, this gap rose to 14% in the final quarter.

However, it remains difficult to draw firm conclusions for what this may mean in 2017 given the high level of political uncertainty surrounding Brexit and the new US President. Indeed, figures for the wider market indicate a relatively subdued end to 2016. LonRes data, which captures more sales but is less representative of activity in PCL markets further east, showed a decline of 23% in the final quarter.

Meanwhile, price growth began to show signs of bottoming out. While there was an annual decline of 6.7% in January, we forecast a relatively flat market in terms of price recovery in 2017.