Despite a backdrop of political uncertainty, sales volumes are starting to pick up in the prime central London property market as lower asking prices release pent-up demand, according to a leading buying agency.
The highest value markets of prime central London continue to be adversely impacted by the stamp duty effect, which largely explains why prime London residential values have been falling over the past 18 months, with prices now around 15% lower than their December 2014 peak.
But it would appear that committed sellers are starting to understand the need to factor in both the additional stamp duty and economic uncertainty to their price expectations in order to attract very cautious purchasers, according to this latest report from Black Brick.
“We are seeing vendors and agents become more realistic with pricing, and the market has now largely absorbed the stamp duty increases that came into force last April, so buyers are wanting to get on and purchase,” said Camilla Dell, managing partner of Black Brick.
Dell does not expect to see prices fall much further, given that the falls in prime London pricing over the last 12 months or so correlate very closely with the stamp duty increase.
She continued: “Those properties at the lower end of the market, where stamp duty was basically unchanged, have held their value well. However, for more expensive property, price falls tend to mirror the increased stamp duty charge.
“This has given a useful yardstick on which to negotiate with sellers – we can look at the property's value in 2014, take off the additional stamp duty, and use that as a benchmark. It’s proving a successful approach for us and our clients.
"It's in a flat market like this where a buying agent can really help – we are going in, negotiating hard – and it’s working.”
Black Brick says that it has negotiated below asking price on 67% of the properties recently purchased on behalf of clients, on average by 7%.
There are currently a range of buyers in the market of all nationalities particularly British and Middle Eastern, the majority - almost 50% - are owner/occupiers, with 25% investor-led. Both Camilla Dell and Caspar Harvard-Walls, partner at Black Brick, have recently returned from trips to the Middle East and Asia and report a strong appetite to invest in London property.
Dell added: “The fall in sterling has seen cost reductions in the 30-40% range for dollar buyers which is partly the reason why these buyers are keen to invest. Many have decided that this is the year to add to their London portfolios and we have been instructed by a number of families to start the property search.”