Prime listing outside of London increased by just 0.6% in the second quarter of the year, suggesting there has been little sign of a post-election bounce at the top end of the UK housing market as buyers remain cautious.
A lack of upward pressure on prices has been consistent across all regions beyond London, with a lack of urgency among buyers in part stemming from a relatively sluggish market in the capital, according to the latest prime residential market report from real estate firm Savills.
The report says that this has combined with relatively high levels of stock available on the market, built up largely as a result of a relative dearth of transactional activity in the run up to the general election.
‘For the time being this has slowed the ripple effect, despite the significant value gaps between London, the commuter zone and beyond, which would normally drive a flow of demand through the different segments of the prime housing market at this stage in the cycle.
As a result, annual price growth in the prime regional markets stands at a subdued 1.6% on average,’ it explains.
Though the threat of a mansion tax has now evaporated, the report suggests that the market continues to be held back by tax considerations. ‘In London and at the top end of the country market, the increased cost of stamp duty, following the Autumn statement of December 2014, remains a barrier to both price growth and activity,’ is says.
Illustrating this fact, in the regional housing market over £2 million prices are 1.7% below their June 2014 level. In Scotland the introduction of the Land and Buildings Transaction Tax, which replaced stamp duty in April has introduced higher rates of tax at lower price points, has caused prime values to fall by an average of 0.6% in the past quarter and by 0.9% year on year.
In England and Wales the markets under £1 million and between £1 million and £1.5 million have been less affected by these tax concerns but more affected by weak buyer sentiment and the restricted availability of mortgage debt feeding up from the mainstream markets.
The report points out that despite a continued benign interest rate environment, transactions in the mainstream market appear to have plateaued at around 1.2 million per annum. With the mortgage regulations restricting the amount of debt prospective buyers are able to obtain and restricting their ability to trade up the market, this is still well short of pre-crunch norms, it adds.
Although mortgage availability has a less significant direct impact in the prime markets, it will impact on some buyers in their 30s and 40s, the report also suggests. ‘While restricting the amount they can borrow, this may act as a catalyst for them to move into the commuter zone as they look to stretch their debt and equity further in less expensive markets,’ it explains.
While sellers need to remain realistic in terms of pricing, there are opportunities for buyers, and we expect this to extend into the Autumn market, the report says. ‘There are early indications that sentiment is beginning to pick up in the mainstream markets regionally, while over the medium term the relative value offered in most prime regional markets compared to London is likely to underpin price growth in this sector,’ it concludes.
BOOKMARK THIS PAGE (What is this?)
Source: Property News Spain