Cluttons is predicting prime central London houses prices to rise by between 2.5% and 3% in 2016, due to ongoing uncertainty around the EU referendum.
This is compared to 5.3% in 2015, down from the 9.6% recorded in 2014.
The agent’s head of research, Faisal Durrani, said a “cocktail” of macro and domestic risks were weighing in on global demand for London, from falling oil prices to weak Chinese economic growth and the strong dollar. However, the most significant impact comes from the timing of the upcoming EU referendum.
“The internal political jostling on agreeing a 2016 or 2017 date for the in-out vote is certainly not helpful for business confidence and consumer sentiment,” said Durrani.
“Further speculation on the timing of a referendum is likely to be detrimental to sterling, which in turn affects the value of residential assets in London.”
Cluttons is predicting demand in 2016 to be driven largely by the domestic market, and strongest in the £500,000 to £1m price bracket. However, growth in this market will be capped by regulation.
Both TSB and Barclays capped loan-to-income ratios at 4.5 times annual income in 2015, with Santander announcing a similar move in January.
Durrani added: “Slipping mortgage multipliers, partially fuelled by a fear of liquidity shortage with the falling value of the sterling, is the most immediate concern for domestic buyers along with the looming interest rate increase.”
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