Growth has been on a downwards trajectory in recent months ahead of the general election, but the Conservative Party victory suggests April is likely to mark the low-point in the cycle.
The principal effect on the prime London property market is that it removes the prospect of a mansion tax on properties worth more than £2 million. This will lift transaction levels but the extent of any short-term boost to prices is
less clear-cut.
It will also be significant to note to what degree the opposition Labour Party moderates its policies around wealth creation
and taxation and whether this reduces the rhetoric of the wider economic debate.
The safe haven appeal of prime central London was evident during 2011 as fears over the future of the euro zone mounted. The crossover in 2013 happened as the UK economic recovery took hold, boosting price growth beyond prime central London and
paving the way for the Conservative election victory. However, price growth in both areas has slowed notably since last summer as the election approached.
Today the strongest price growth has been in newer prime markets north of Hyde Park and east of Mayfair, due to the lower concentration of high-value properties and as buyers seek more value away from established markets.
However, it has not been a clear-cut picture, which suggests any recovery will not be uniform. At the sub-£2 million level, the impact of the election was minimal in Islington while activity dipped in Canary Wharf, due to its links with the financial services sector and position as a first-home market, suggesting a higher level of pent-up demand.
In higher price brackets, a general mood of pre-election reticence was tempered by strong demand for high-quality new-build properties as well as the continued flow of safe haven money into London as geopolitical risks shifted around the world.
Tom Bill, head of London residential research at Knight Frank, commented: “Following the Conservative Party general election victory, several short-term outcomes are likely in the prime London residential market.
First, numerous transactions put on hold pending the outcome of the vote will proceed as the risk of further property taxation appears less of an immediate threat. Other sales will progress simply because the election is over and a deeper sense of political uncertainty has receded.”
As the logjam unblocks, it is likely to be accompanied by a hardening of expectations on the part of vendors over asking prices and some will expect prices to immediately rise as a direct consequence of the election result.”
In the short-term, the impact on pricing is likely to be less marked than some expect. The first reason is the quantity of properties coming onto the market. Many vendors lined up sales for Monday 11 May, irrespective of the outcome of the election. The second reason is that this short-term increase in supply is likely to exceed any uptick in demand.”
