The gulf in the London property market was at its widest this year in December, according to Knight Frank’s latest prime London sales and prime London lettings data.
The difference between the annual price change in prime central and prime outer London was at its widest in December as Brexit-related uncertainty increased in the run-up to the end of the transition period.
Average prices in PCL fell 4.3% during 2020, while the annual decline narrowed to 3.2% in POL after monthly growth of 0.1%.
Brexit uncertainty and movements in the pound have a more marked impact in central London markets, where there is a greater proportion of overseas buyers
In the year following the EU referendum in June 2016, prices in PCL fell 6.3%, which compared to a decline of 1.9% in prime outer London, where there is a greater predominance of UK buyers.
Tom Bill, Head of UK Residential Research at Knight Frank said, “Renewed uncertainty over Brexit means some buyers and sellers became more cautious in the final weeks of the year. As we saw after the EU referendum, this tends to have more of an impact in central London.”
However, any impact of Brexit-related uncertainty in PCL may be short-lived as both the UK and EU work their way towards a deal.
Knight Frank has forecast that price growth in PCL will outperform mainstream UK and prime outer London markets in 2021 as a wave of pent-up overseas demand is released.
Higher levels of supply and weaker demand continued to exert downwards pressure on rental values across prime London markets in the final month of the year
Average rents finished the year down 11.9% in prime central London and 9.8% in prime outer London.
The number of tenancies being agreed remains high as tenants continue to seek more space to work from home and take advantage of falling rents
The number of tenancies started in the week ending 12 December was 43% higher than the five-year average.
He added, “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 second time this year.”
“What is also apparent is that central London has been more impacted than outer areas including south-west London, where a stronger sales market means fewer rental properties have come onto the market. For example, the decline was 3.2% in Wimbledon and 4.2% in Hampstead during 2020.”
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