Prime London still adjusting to tax changes
Prices of prime London residential properties fell marginally in the first quarter of 2016, as uncertainty regarding the global and domestic economic outlook and the EU referendum largely offset any investor or second home buyer rush to beat the stamp duty surcharge on additional homes payable from April 1, according to new research from international real estate adviser Savills.
Values across the whole of prime London slipped by an average of -0.3 per cent in the three months to the end of March, but there continues to be a distinction between the higher value, discretionary prime central London markets and the more domestic, needs-based outer prime London locations.
In the most expensive markets of prime central London prices fell by 0.8% in the first quarter. This leaves values at the very top end of the market a total -6.7% below their 2014 peak, when an adjustment was triggered by the Chancellor’s announcement of new stamp duty rates for higher value properties in his autumn statement.
By contrast, in the less expensive and more domestic outer prime London housing markets, which run from Richmond and Wimbledon, though Battersea and Wandsworth in the south and west, and Islington, Wapping and Canary Wharf in the north and east, prices remained flat in the first quarter of the year, having risen between 2.6 and 4.2 per cent over the past 12 months.
Notably, price growth across all prime London markets has been slower than the mainstream over the past 3 years. This is because the lower value outer London markets were slower to recover post downturn, have benefited from stamp duty reform and remain more accessibly priced.
“Unlike other parts of the London housing market, the prime markets remain fairly price sensitive and increasingly dominated by needs based buyers,” says Lucian Cook, Savills head of UK residential research.
“The recent Budget statement confirmed that the stamp duty take form the top end of the market has risen following the reforms of December 2014, despite lower transactional activity, effectively signalling that this policy is here to stay and will continue to influence buying and selling decisions and assessment of value.
“Given historic levels of price growth, the increased tax burden and political uncertainty stemming from the pending mayoral election and EU referendum, our view is that we are unlikely see any price growth over the course of 2016 as the market continues its adjustment.”