London likely to reclaim its property market dominance in 2021

London likely to reclaim its property market dominance in 2021 [Photo: iStock/johnkellerman]

London's property market has experienced one of its weakest years in recent memory in 2017, seeing slower rates of house price increases, and even the occasional slump in values. However, this is only a temporary reality likely to right itself in the next few years. 

According to the latest report released by KPMG Economics, one of the biggest factors that has been holding back the capital in the last few months is the political uncertainty, particularly that surrounding Brexit, that people continuously have to deal with. 

This turbulence leads to buyers waiting to see what will happen before they make a move, and sellers lowering prices when they perceive demand to be dropping. However, the good news from KPMG is that this is only a temporary problem for London. 

The city has long been well known for its thriving property market and the fact it can come through problematic situations - such as the economic crisis of 2007 - relatively unscathed, and it seems that this will be the case once again after the Brexit dust settles. 

KPMG predicts that for this year, house prices in London are likely to increase by just one per cent. It said that the situation will worsen a little in 2018 as well, when prices could fall by one per cent. 

However, in the year that the UK leaves the European Union officially (2019), prices are going to start gaining pace once again, and should climb in the capital by 2.5 per cent. This is a trend that will continue for a few years after as well, with 2020 and 2021 seeing values rising by 3.9 per cent and 4.4 per cent respectively, allowing London to take back its position as the fastest growing property market in the UK. 

"London's property market isn't just made up of people's homes. Foreign investors plough money into property in the capital as it is seen as a safe haven asset, and they will continue to do so after Brexit, especially if sterling remains weak," said KPMG's chief economist Yael Selfin.

"If the UK's exit from the EU is done in a positive way, we're likely to see demand for property in the capital rise as it will remain one of the most vibrant and exciting cities in Europe," he added.