The influence of Brexit on prestige real estate in London

Published on the

On June 24, 2016, the Brexit surprised everyone, including the economic and financial circles.

Since then, luxury real estate in London has lived through dark days. Prices fall from 10 to 15% in the English capital, considered the most expensive city in the world! As a reminder, London has always been the wealth of England. Does the City not weigh 10% of the English GDP?

After a prosperous period where prices had risen by 86% in 8 years, the future of the prestige real estate in London is very different indeed. One can fear the worst if the pound sterling continues to depreciate in the months to come. As a matter of fact, this could lead to a price correction in the luxury real estate sector.

The real estate specialists of the luxury sector are very clear: the prices are indeed falling. Let us take for example the promoter Berkeley Group, which announced on December 2 last a decrease of 20% in its reservations of housing under construction, compared to 2015 at the same period.

This downward trend is confirmed by a study carried out by the real estate group Knight Franck. This study reveals that "from January to September, the number of transactions at prices above 10 million pounds fell by 17.8%". Should we fear the worst, knowing that the real estate luxury market has virtually stopped just before and after the referendum? At that time, only five properties with a value exceeding 10 million pounds were sold. If some foreign buyers decide to sell their real estate in the upscale neighbourhoods of Kensington, Notting Hill, Knightsbridge, Bayswater, Chelsea or Mayfair, this situation may get worse.

However, it is important to nuance such a situation: if the Brexit is well managed, investors could reduce their period of observation and return to the London market thanks to new favourable conditions. Indeed: when the pound sterling depreciates by 11%, the market of the English capital becomes 11% more attractive for foreigners, especially for Asia or India. On the other hand, if the Brexit does not take place under the best conditions, the English capital will place itself in the luxury real estate of other big cities of the world, like Paris or New York. Stay tuned…