Values across London’s prime housing market grew by an average of 1.6% in the three months to the end of June, but remain 0.7% below where they were a year ago.
Increased stamp duty rates and unsold stock levels restricted a bounce in listing values after May’s general election, according to the latest analysis from real estate firm Savills.
The report also says that buyer caution has been most evident at the top end of the market, with prices in the prime central London market barely showing any net house price growth over the quarter with a rise of just 0.3%. This means that house prices in this market are down by an average of 4.3% year on year.
According to Lucian Cook, head of UK residential research at Savills, there was a feeling prior to the autumn statement last year that the prime markets of London were looking fully priced following a sustained period of growth.
‘The stamp duty increases introduced in December 2014 mean they now also looked fully taxed, despite mansion tax fears being confined to history,’ he explained, adding that this effect has not been confined to prime central London.
Indeed, across the remainder of the prime London market homes worth over £2 million saw values fall by an average of 0.9% over the past year, despite rising by an average of 2.4% in the quarter.
Across London, the market below £1 million, where buyers benefitted modestly from the stamp duty reform, recorded annual price growth, albeit of just 2.4%, as the mortgage market review continues to restrict the amount people can borrow, whether because of the stress testing of affordability or the income upon which this is judged.
‘In the early part of the year we could put buyer reluctance to commit down to political uncertainty pre-election. Only now is the dual effect of taxation at the top end of the prime market and mortgage regulation at entry level becoming clear,’ said Cook.
‘These constraints are keenly felt by buyers, while some sellers are clinging to expectations that values can keep on rising. That has created a gap in price expectations in parts of the market which is likely to hold back any recovery in transaction levels,’ he pointed out.
‘With those transactions having been suppressed prior to the election, it seems inevitable that high value sales will have peaked, at least in the short term, in 2014. That means current constraints on the market could have a negative on impact on stamp duty receipts from most expensive housing upon which the Treasury has become increasing reliant,’ he concluded.
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Source: Property News Spain