The UK capital, which has seen skyrocketing growth in recent years, has witnessed a fall in demand for property in its prime market due to global economic complications.
I’ve decided to look into this news and the detailed reasons behind the fall.
Year-on-year decreases
Rents in the prime sector were down 0.5% last month – this is the steepest decline in two years. Annual rental value growth slowed to 1.5%.
In specific districts, changes were evident – falls of 2% in South Kensington and 1.2% in Chelsea were the largest drops according to Knight Frank reporting published by Property Wire.
Growth peaked at 4.2% in May, potentially because of the UK’s General Election which saw the business-friendly conservatives win an outright majority. Since then, continuing economic difficulties in the Eurozone as well as China’s slowdown have effected prices.
The drop in demand contrasts strongly to 2014, especially when considering that the number of tenancies agreed in September 2015 was 12% lower than the same month in. Such a drop
Tom Bill, head of London residential research at Knight Frank, said that it has been a year of two halves for the prime central London lettings market.
Mr Bill also said:
‘The cause was uncertainty around property taxation and increased rates of stamp duty mean it remains a live issue, particularly in the super prime £5,000 plus per week price bracket. However, anxiety around the global economy has dampened demand since the summer,’
Uncertain climate
Mr Bill went on to say:
‘The uncertainty has centred on events in China, which has caused companies to curb relocation budgets and recruitment plans. The falling oil price has also impacted sentiment among energy companies’
Further to this, potential intervention by the European Central Bank has also slowed down demand due to speculations about the global economy.
In summary, prices are falling in central London – the reasons behind them may not be long-term however, so staying informed about the situation is important.
Nery Alaev
Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.