Average prices across prime central London fell by 0.2% in June 2016, the weakest monthly result since November 2014, but sales volumes rose during the period, according to property-consulting firm Knight Frank.
The month’s result pushed annual price growth to 0.6%. The index data for June largely covers the period leading up to the UK’s EU referendum.
The number of transactions across prime London after the referendum was 38% higher than the prior week and 29% higher than the final week of May 2016.
The report says that weaker price growth, together with rising economic and market uncertainty surrounding the European vote, prompted vendors to reduce asking prices over recent months.
An initial reading of post-referendum data on new-buyer registrations and viewings reveals both have slipped back slightly compared to the same period a month ago – although it is still very early to draw firm conclusions, the report added.
Authors of the report opined that political uncertainty in the UK will undoubtedly weigh on sentiment, and will be likely to last until at least the heads of terms of the new relationship between the UK and the EU are agreed.
"A reduction in political risk, should allow mitigating factors to kick in and support the London market," the report says.
A cut in the UK base rate, while unlikely to fully translate into lower mortgage rates, would be a positive for the property market. Similarly, recent and proposed rate cuts in markets like India and China and record low government bond yields make property a more attractive investment by comparison.
The current residential yield in prime central London is 3.1% compared to 0.9% on a ten-year UK government bond.
On a quarterly basis, while the whole market saw prices fall 0.3%, prices for sub-£1m properties rose on average by 0.4%.
Furthermore, new-buyer registration volumes rose in the £2m-£5m and the £5m-£10m markets (9% and 8% respectively) over the past year. These markets have been the weakest performers for two years in terms of price growth.