"Our mid term prognosis for the prime London market remains positive, but a period of adjustment is unavoidable," says Yolande Barnes, Head of Residential Research at Savills. "In March we stated that we were ‘at or approaching a tipping point where buyers would resist further price rises’. It now seems clear that we are at that tipping point."
The tipping point has been brought about by an increase in available stock across most markets as vendors are encouraged by recovery to market their properties. Much of the growth in prices last year occurred on the back of very low stock levels, which were unable to match a modest increase in demand. This demand has fallen back in the face of first election and then budget uncertainty and Savills says a second slip – rather than a double dip in values – is now inevitable.
"Our own market strength indicator which looks at changes in a combination of demand and supply factors, predicted the change in values that we have seen and points to further weakening in prices. I think we will look back and see this moment as a mini peak in the current recovery cycle," says Barnes. "This week’s austerity Budget will have ramifications for the whole market, and the four month wait for details to emerge from the spending review will do little to improve the general ‘feel bad factor’ that is beginning to impinge on the market.
"Having said this, we maintain that the prime markets and central London in particular, are well-placed to take advantage of turmoil in world markets."
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