The pressures of taxation and uncertainty over Brexit are expected to continue to weigh on the market over the next two years, with the general election on 8 June compounding the uncertainty in the short term. However, as the prime markets adjust to the changed tax environment and benefit from greater certainty over the political and economic outlook, we expect a return to price growth.

A cut in stamp duty at the top end of the market is less a probability than a possibility over the short to medium term. There is little doubt that a cut would act as a boost to the prime housing market, but it cannot be relied upon.

We have seen prices adjust to these increases, but we now expect a period of broadly static prices as the market becomes more accustomed to higher transactional costs. During this period, overseas buyers' greater exposure to capital gains tax and inheritance tax is likely to temper the effect of weak sterling in the central London market.

Despite low interest rates, general uncertainty around the impact of Brexit is expected to mean the market is exposed to short-term fluctuations in sentiment. These will be affected by the relative success of negotiations to leave the EU now that Article 50 has been triggered.

More specifically, the position of London as a global financial centre is critical to longer-term growth prospects in the capital and its hinterland. In the absence of firm evidence to the contrary, we are assuming that while some city job losses will result from institutions relocating some of their activities to other European centres, London will retain its position as a key financial centre. Added to this, London’s evolution as a Tech City is likely to support longer-term growth prospects.

Longer-term return to growth 

In due course, a little bit of certainty is likely to go a long way as negotiations proceed, bringing a greater sense of urgency to the market. After such a long period of adjustment, particularly in inflation-adjusted terms, prime property across the country will increasingly look like good value Parts of the prime market will be affected by specific factors. History tells us a second referendum in Scotland would temporarily see the return of a needs-based market, while the additional stamp duty in the second home and coastal markets are likely to leave them more exposed to shifts in sentiment.

But as the economy starts to pick up and consumer confidence improves, we expect this to provide the platform for a recovery in prices. Discretionary buyers will be increasingly willing to exploit the price gap between London and the commuter zone, driving a flow of wealth from one to the other and restarting a wider ripple effect previously held on pause.