Despite ongoing political and economic uncertainty, sales volumes are rising in the central London prime property market as buyers look to take advantage of falling asking prices, according to fresh research.
The latest figures from Savills show that average house prices across all prime London dropped by -2.2% in the final quarter of 2016. This left values down -4.9% year-on-year and -5.8% since the stamp duty increases of December 2014 and subsequent announcement of a 3% surcharge on additional homes effective from the start of April last year.
The impact of the stamp duty changes continue to have the greatest adverse impact across the highest value markets in prime central London, with prices down by an average of -6.9% year-on-year, against a Savills forecast of -9% for 2016. This means that prime central London prices are down -12.5% in total since the December 2014 peak.
By contrast, in outer prime London, where the average value is just below £2m, prices fell -4% in 2016 and are just -2.7% down from where they were two years ago.
“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, ” said Lucian Cook, Savills UK head of residential research.
“We saw a real dearth of transactions over the late spring and summer months following the race to beat the new 3% 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.”
Separate data from Lonres reveals that central London sales of properties worth more than £1m were 21% down year-on-year in 2016. In the three months to the end of July, transaction volumes were running at about half the same period in 2015, but in the last quarter of the year had recovered to within 16% of 2015 full year numbers.
Savills own market intelligence suggests that from January to the end of November there were around 320 sales worth over £5m in London, with a total of over £3.7bn spent in this part of the market. In volume terms, sales were 17% below those in this bracket in the same 11 month period of 2015.
Contrary to some reports, the very top end of the market has been more active than in 2015. In the 11 months to the end of November £1.43bn was spent on properties worth over £20m compared to £1.07bn in 2015.
“Recent market activity demonstrates the continued appeal of prime London property at the right price,” said Cook. “But buyer sentiment remains fragile. Improved transaction levels are the result of adjusted pricing and should not be seen as a precursor to price rises in the foreseeable future. High stamp duty rates and the uncertainty created by negotiations to leave Europe will still need to be factored into expectations on value.”
Savills forecast for prime London anticipates no price growth over the next two years, with a recovery to trend growth not coming until 2019. The forecast is for prime central London growth to total 21% in the five years to the end of 2021.