London’s prime property market is unique, with attractions for overseas buyers that are hard to match anywhere else in the world.
Buyers’ properties are protected by an impartial legal system, they have the medium of the English language, very good schools, a safe environment, and London’s status as a financial hub.
A weaker pound is helping foreign buyers, whose money goes further when translated into sterling.
Prices may be drifting, but history suggests there will be a powerful bounce.
There is, however, no room for complacency. Bad policy choices could do lasting damage to the market. More on that in a moment.
First, what is driving the prime London property market? Stamp Duty is the main influence, given the changes announced in December 2014 have worked as intended, raising bills for those buying the most expensive properties.
This has made buyers more cautious, because they now must wait two or three years to see their returns.
Then there is uncertainty surrounding the outcome of the Brexit process, and an economic climate, that although healthy in many ways, is not as robust as it could be.
In this climate, those who do not need to sell are keeping their properties off the market. This means that, when valuing those properties that are for sale, there are fewer comparators, thus valuations tend to be more downbeat.
Prices in the prime London market have drifted off by about ten to 15 per cent. In the past, such a falling off was rapidly reversed when the economy picked up strongly. Will the pattern repeat itself?
Possibly, but Brexit is a one-off event whose impact is hard to forecast.
Regarding the danger of poor policy choices wreaking havoc, we have already had talk of a Wealth Tax, a so-called Mansion Tax and other fiscal penalties. Let’s be clear: going down this path would be disastrous. The resulting fall in prices would hit not only prime property but the next tier down, in areas such as Islington and London Bridge.
This unique market is a precious asset. It should not be thrown away.
Alpa Bhakta is chief executive of Butterfield Mortgages