Luxury London House Prices to Fall 5% in 2020 on Pandemic Impact

(Bloomberg) -- House prices in London’s most desirable areas are set for a further fall this year, extending a five-year-slump.

The cost of buying a home in one of the capital’s swankiest areas is expected to fall 5% this year, according to a report published on Tuesday by property broker Knight Frank. That’s down from an earlier prediction in April of flat prices and is based on the lockdown being gradually eased rather than lifted quickly.

“It’s become clearer that some lockdown measures will remain in place into July and that social distancing rules governing day-to-day life, including property transactions, may remain in place beyond that,” according to Liam Bailey, global head of research at Knight Frank. “The lockdown, at least as far as the property market is concerned, has been very effective.”

The pandemic has crushed hopes of a recovery in London’s housing market after years of sustained declines. The measures imposed by the U.K. government to halt the spread of the virus have put the brakes on the housing market.

Prime London house prices have already suffered a 25% drop since 2014, with the political uncertainty surrounding Brexit hurting values. Brokers had forecast a return to house price growth this year after the Conservative party’s decisive election victory in December helped lift the uncertainty that’s been weighing on demand.

Knight Frank sees house prices in the rest of the country falling by even more, down 7% through the end of 2020. The number of new properties being listed for sale is down 90% since lockdown measures were introduced, according to the report. There may be an uptick in prices in the second half of the year in prime London, the broker said.

©2020 Bloomberg L.P.