Central London house prices are expected to fall by 9% by the end of this year due to tax changes and ongoing uncertainty follow the Brexit vote.
The combination of high levels of stamp duty and general uncertainty following the referendum have impacted the house market, said Savills.
If house prices in London’s central locations, including Mayfair, Knightsbridge and Belgravia, continue to decline on top of last year’s 3.3% drop, £4 million properties could fall by £360,000.
The global estate agency said that whilst negotiations surrounding the UK’s withdrawal from the EU, which could take up to two years, property value is likely to experience 0% growth. However, this will bounce back with an 8% jump in 2019.
Lucian Cook, director of Savills residential research said: “Two further years of uncertainty, as the Government’s crack negotiating unit tries to extricate the UK from the EU, are also likely to limit the prospect of any serious price growth over that period.
“This would bring prime London prices well below the long run trend of real house price growth. That is the kind of phrase which warms the heart of a residential property analyst.
“What it means for everyone else is that all things being equal it will leave capacity for renewed price growth at the end of that period.”
Last month, Office for National Statistics (ONS) revealed London house prices are no longer the fastest growing, as some of the capital’s boroughs saw significant falls.
Savills said that London’s residential markets are also closely linked to its performance on the global stage. Yolande Barnes, director of Savills world research said: “Prime markets in gateway cities across the globe have been honeypots for international investors not only in London but also in New York, Singapore and Hong Kong, for example.
“Prime real estate markets in these ‘alpha cities’ are closely linked to wider business location preferences and investment preferences, reflecting the success and prominence of the cities on the global stage.”
Ms Barnes added: “The unique combination of London’s social and environmental quality, as well as its size and economic prowess, means that the demand fundamentals for its real estate should remain strong through economic cycles and post-brexit wobbles.”