There are early indications that the relative political certainty provided by last month’s general election result is starting to boost activity in prime London markets.
Excluding the month before a pre-announced stamp duty increase in April 2016, the number of exchanges for existing homes in prime central London in December 2019 was the highest monthly total since April 2014.
Indeed, in the ten working days following the election, Knight Frank transacted more exchanges in PCL than any equivalent period since December 2016.
Overall, the number of exchanges in prime London markets was 14% higher last year than in 2018 and the highest annual total since 2014.
The reasons for this uptick include the relatively benign global economic backdrop, ultra-low mortgage rates, the currency discount and the fact prime residential markets have re-priced in response to political uncertainty and tax changes.
The average discount in the so-called golden postcodes of Belgravia, Knightsbridge and Mayfair in 2019 compared to the five-year average was £150 per square foot for existing homes.
However, the impact of some of these demand drivers will be more short-lived than others, potentially creating an incentive for buyers and sellers to act in the short-term.
A stable government means political uncertainty may lift to some extent in 2020. The messages from the Bank of England are currently mixed but interest rates will eventually begin to normalise and the currency discount erode.
Furthermore, a global economic recession is overdue, although there are questions over its severity and whether the US will act to avoid it taking place before the Presidential elections in November this year.
Meanwhile, the government has indicated it will alter stamp duty rules for non-resident buyers, which may encourage overseas buyers to act sooner rather than later.
The extent of the pent-up demand that has built over 2019 could also inject more urgency into the market. In the final quarter of last year, there were 10 new buyers for every new property listed in prime central and outer London, the highest ratio in more than 15 years.