Uncertainty over Brexit has led to price declines in both the prime sales and rental markets in London, according to a report Tuesday from London-based real estate agency Knight Frank.
The average sales price in prime central London dipped 4.3% year-over-year in December, the data showed. Average sales prices in prime outer London were down 3.2% over the same time period.
Both represented the widest annual price change in 2020, according to Knight Frank.
“Renewed uncertainty over Brexit means some buyers and sellers became more cautious in the final weeks of the year,” Tom Bill, head of U.K. residential research at Knight Frank, said in the report. “As we saw after the EU referendum, this tends to have more of an impact in central London.”
The U.K. and the EU have until Dec. 31, to strike a trade deal, but so far talks have been stalled. The looming deadline, as well as fluctuations in the value of the pound, have kept buyers on the fence, the report said. That’s had a greater effect on prime central London because of its greater proportion of foreign buyers.
If a deal is made by the deadline, that could be a jolt to the market as pent-up demand brings buyers back to the table, according to Knight Frank.
Rental prices in London have also slipped as demand for city apartments has declined and supply has increased.
In prime central London, rents were down 11.9% in December, compared to the same time in 2019, the data showed. Rents in prime outer London fell 9.8% year over year.
“The impact of this supply/demand imbalance had started to weaken over the summer, but tougher lockdown measures in recent months, including a second national lockdown in November, pushed rental values down for the second time this year,” Mr. Bill said in the report.
London and southeast England were designated as Tier 4 zones on Monday, meaning that residents should stay home and non-essential businesses are closed. Travel restrictions will further affect overseas buyers.
Rents in central London have been harder hit than those in outer areas, he added.
“[In] south-west London…a stronger sales market means fewer rental properties have come onto the market,” according to Mr. Bill. “For example, the decline [in rental values] was 3.2% in Wimbledon and 4.2% in Hampstead during 2020.”