Following the vote to leave the EU, uncertainty is likely to further affect prices and reduce demand for property at the top end of the market across Britain.
London's prime property market had already slowed significantly in the 18 months before the EU referendum, largely due to changes in stamp duty rates, which led to average prices falling by eight per cent in prime central London and 1.4 per cent across the capital, according to a new report from estate agent Savills.
However, the report predicts that the effects of Brexit will be uneven across the UK, which some areas performing better than others...
1. The central Prime London market
The weaker pound has already stimulated new international demand, particularly in new builds in the prime London market, which stretches from Chelsea to Marylebone - as highlighted on the map below.
Mortgage inquiries from overseas buyers are up 50 per cent since the Brexit decision, reports deVere Mortgages, a specialist broker for expats and overseas buyers. This is because of a combination of cooling house prices and stronger foreign currencies providing more value.
However, buyers are expected to be more cautious because of higher taxes, and developers are likely to delay building new homes to tighten supply.
2. Prime outer London
The London outer prime markets in the south-west, west, north-west and north and east - as labelled on the map above - are far more dominated by people who live and work in the capital.
However, City workers are key buyers in this market so financial uncertainity post-Brexit is likely to see the number of purchases decrease in the short-term, at least.
"Committed sellers will need to be realistic and flexible"
3. Suburbs and commuter zones
There's a large gap between prices in London and the commuter zone, with the suburbs and beyond beginning to benefit from an increased flow of demand out of London prior to the EU referendum, and this value gap is expected to continue to drive demand.
The most expensive properties are likely to be affected by stamp duty, but properties on the private estates of Surrey and Berkshire are popular with international families so may benefit from a weaker pound.
4. Prime country
Uncertainty means that this market will again be driven by needs-based buyers, with the second home market remaining volatile following the stamp duty surcharge.
Prices have grown by 3.4 per cent on average over the last 18 months, but are yet to get back to their 2007 levels, so will be less affected by Brexit than other prime areas in the UK.Reuse content