The market seems to be particularly slower in terms of sales for properties valued above £600,000, which is the limit for the government’s Help to Buy scheme.
Dave Pinnington, director of intermediary relations of Finance for Business, told Specialist Lending Solutions that the slowdown is not UK wide, as the development market is still strong in other areas of the country, particularly in Birmingham and the North West.
Across the country demand remains strong with properties selling quite fast in places. However in London the time to save a deposit has pushed the average first-time buyer age to around 38 years old.
However, Pinnington said London was not just suffering from the uncertainty of Brexit but also still coping with a number of recent changes that directly affect property investors.
He added: “There have been a number of changes in a relatively short space of time surrounding buy-to-let taxation, lenders’ criteria and affordability calculations, stamp duty increases and an additional foreign investor stamp duty, all impacting upon the desirability of investing in property.
“The property market has always and will always be affected by outside influences and Brexit is no different.
“The overriding factors that will enable further growth and stability will be a strong and stable economy, a desire to stop land banking and to allow developers to build the much needed houses the government keeps calling for.”
Developers accelerating construction to dodge Brexit
However, Zuhair Mirza, principal at Avamore Capital, told Specialist Lending Solutions that more than a proper slowdown, there was a desire from developers to accelerate the construction of already active projects to avoid completions coinciding with the disruptive impact of a no deal Brexit.
But he said new deals were taking much longer to complete and as a direct consequence fewer projects were being started.
He added: “We also see a slightly stronger market outside London for very affordable properties, particularly first-time buyer units, and developers are seeing pressure points slowly building in the availability of labour.
“Prior to Brexit, there was already some weakness in the premium market and, even outside of that premium segment, affordability has been very low for some time.
“Aside from Brexit, there have been a vast number of changes targeting international capital, such as inheritance tax and capital gains tax, which has also taken its toll on the London market.
“There is no doubt that Brexit has created further weakness in the more affordable parts of London. Given the fundamental impact of Brexit has not yet come into effect, such as potential trade barriers, the current weakness is being driven by sentiment and the underlying impact is yet to be seen.”
Prime Central London opportunities
Uma Rajah, CapitalRise’s CEO, agreed the Prime Central London (PCL) market was slower.
She said: “In Prime Central London, transaction volumes are lower than they were a few years ago, but we believe this is driven more heavily by the stamp duty increases and resulting market softening than Brexit.
“The main impact of Brexit is the uncertainty that it is causing but we are getting closer to the end of this period of uncertainty now.
“As most of our loans are 12-24 months in duration projects that we fund now should complete after this period of uncertainty is settled whatever the outcome of the Brexit negotiations may be.
However, Rajah added that there were still lending opportunities and the draw of the capital would likely see it rebound from any Brexit fallout.
“I think property developers also realise that Prime Central London has historically proven to be the most resilient part of the market compared to London overall or the UK overall,” she said.
“For this reason, they expect to see it bounce back much faster than other parts of the market as soon as we pass through this period of uncertainty and they are keen to be on the front foot when that happens.”