Realistic pricing from sellers is helping to stimulate sales of London homes.
London has seen its prime market slow down in the last year, following economic uncertainty in the wake of the Brexit referendum, but also due to the higher stamp duty costs facing buyers, from 2014’s increase to 2016’s surcharge of 3 per cent.
The highest value markets of prime central London continue to be most impacted by the stamp duty effect, according to Savills, with prices down by an average of -6.9 per cent year on year. This means that prime central London prices are down -12.5 per cent in total since the December 2014 peak.
While the market is slowing, though, increasingly flexible sellers are being realistic with their pricing, which is helping to stimulate sales.
“We saw a real dearth of transactions over the late spring and summer months following the race to beat the new 3 per cent surcharge. But further price adjustments, coupled with the currency play for international buyers, appear to have triggered greater buyer commitment and prime London sales volumes picked up significantly in September, October and November before easing back in December,” says Lucian Cook, Savills UK head of residential research.
“Committed sellers increasingly understand the need to factor in both the additional stamp duty and economic uncertainty to their price expectations in order to attract still very cautious buyers.”
According to data from Lonres, central London sales of properties worth over £1 million were 21 per cent down year-on-year in 2016. In the three months to the end of July, transaction volumes were running at about 50 per cent of 2015’s levels, but recovered to within 16 per cent over the last quarter of the year.
The report arrives as research by Countrywide shows that the number of homes sold in the UK for more than the asking price has fallen. In January 2016, just over 40 per cent of London property was sold for over the asking price, a figure that fell to 23 per cent in Novemeber 2016.
According to Home.co.uk, the trend of modest price falls in London and Greater London will continue in 2017, as the supply of property for sale rises.
Johnny Morris, head of research at Countrywide, tells The Telegraph: “We expect prices to fall next year as this slowdown works through the system. Generally the first thing to change will be the number of transactions, and then after the gap between what people will pay and how much people will accept opens up quickly and takes a while to close. Sales slow, and then there is a price adjustment.”
Stamp duty change continues to transform prime London market
8th November 2016
The stamp duty change introduced recently continues to transform the prime London property market, reveals new research from Knight Frank.
The change to the way the tax is calculated was first announced in 2014’s autumn budget, introducing a more progressive system that charges more for expensive properties. That shift continues to impact the market today, with the city’s prime sector seeing a slowdown in sales in the last 12 months, due to the increased transaction cost for purchases above £1.1 million.
The slower sales, though, have driven up lettings activity. In particular, the super-prime (£5,000-plus/ week) lettings market has benefitted, says Knight Frank.
“The stamp duty on the purchase of a £15 million property is £1.7 million, which is the equivalent to three years rent,” says Tom Smith, Knight Frank’s Head of Super-Prime Lettings. “It is a calculation that is driving super-prime lettings demand.”
“Given the higher running costs buyers also face, stamp duty can be a concern unless they plan to be in a property for the long-term,” he explains. “This is particularly the case while uncertainty surrounds the short-term prospects for price growth.”
The number of super-prime lettings transactions rose 16 per cent to 109 in the year to September 2016, compared to the previous year, according to LonRes data. According to Knight Frank data, the number of viewings have increased by 6 per cent over the same period.
Transactions are spread across the centre of London, with a focus on South Kensington, Knightsbridge, Mayfair, Regent’s Park and Holland Park.
Sales of London prime property up for first time in 2016
6th April 2016
Sales of London prime property have risen for the first time in 2016, as the capital’s market shows signs of springtime momentum.
Transaction volume rose in March 2016 year-on-year, according to Knight Frank’s latest report, the first annual climb recorded so far this year. The rise in activity was fuelled by the stamp duty deadline, as buyers rushed to complete purchases before the new 3 per cent surcharge on second homes came into effect.
The surcharge, which applies to buy-to-let investors as well as second home buyer as of 1st April 2016, gave purchased added incentive act before the end of the month, bucking the trend of the first quarter of 2016, which had seen sales stay flat in both January and February 2016.
However, the temporary boost in sales was also driven by the acceptance of sellers that the prime central property market has cooled since the boom days following the financial crisis. Where it was once on an upwards trajectory, the market is now undergoing a period of slowdown, thanks to the impact of a series of tax changes in the past 18 months, although the uncertainty surrounding the UK’s EU referendum in June may also be weighing upon market sentiment.
Now, vendors are adjusting their expectations accordingly, lowering their asking prices to attract buyers. Annual growth slowed to 0.8 per cent in March 2016, the lowest figure for more than six years, notes Knight Frank. (The previous low was a decline of 3.2 per cent in October 2009, following the collapse of the Lehman Brothers).
Asking prices are typically declining by in excess of 10 per cent to attract price-sensitive buyers, according to the agency, but prices are increasingly polarised: in high-end areas around Hyde Park, tax changes have had a more dampening effect, while lower-end markets, such as Islington, are performing better.
As a result of this polarisation, Knight Frank forecasts a 2 per cent decline in western markets and 5 per cent growth in markets east of Mayfair and south of the River Thames in 2016.
The figures follow news that some owners of units in the Battersea Power Station development have been selling their properties at reduced prices, with one townhouse in the project reportedly listed in July 2015 for £6 million but had its price slashed to £4 million at the start of this year.Google+