PCL market update: October 2014

Has the Prime Central London market died or just gone into hibernation for a while?

After a busy Spring, the Summer seemed to arrive early this year and with it came an uneasy feeling that a lot of little things were collectively beginning to affect the market:

ATED – the annual tax on enveloped dwellings reduced to catch properties worth £500,000+

CGT – Capital Gains Tax being levied on company owned property as from the new tax year in April 2015

Talk of a Mansion Tax in some shape or form

SDLT – Stamp Duty Land Tax increased to 15% for homes bought by non-natural persons

The mortgage market review – making borrowing more difficult to obtain

A potential rise in the Bank of England base rate

A strong pound

Talk of a Mansion Tax in some shape or form

Now with a General Election looming in May 2015 and Ed Milliband having nailed his flag to the mast by declaring a Mansion Tax will be introduced if Labour wins, the brakes have been gently applied. It seems there is no longer any urgency in the market and buyers are sitting back waiting to see if prices will fall.

Agents, competing for business, who overpriced new stock during June and July in order to win instructions, are now reassessing values and most are now reducing asking prices in order to attract viewings and offers.

Does this mean prices are falling fast? No, they were just overpriced to start with and now the market has paused for thought. New stock is coming on at more realistic prices and while there is now plenty for buyers to choose from, there is not much of great quality particularly in the price range between £2million and £5million.

Like most markets, the property sector is built on confidence. Thanks to constant tinkering with taxation, the UK and particularly London has lost its competitive advantage over other capital cities.  As is always the case when the market softens, buyers become choosier on location. The best homes still sell for good prices but the secondary stock suffers by comparison - often leading to a two tier market.

We predict a period of some 6-9 months before the Prime Central London market revives but it is certainly not dead, just snoozing.  That said, London is still regarded as a wonderful place to live and work and savvy buyers may well take advantage of this lull in the market to buy while the nervous hesitate. As the saying goes, ‘you snooze, you lose’.