Sales Market Update

It has not been a good year for Estate Agents – no market likes uncertainty and that has certainly been the case for property in prime Central London. Post Brexit, we have seen prices easing by up to 10.4%, the number of transactions has fallen by nearly 50% and the average value of those transactions has also fallen as high net worth individuals have largely avoided committing to new purchases. The market below £5million has fared better than that between £5million and £10million yet there have been some remarkably high prices achieved at the top end. Local to our offices, a house in Egerton Crescent has just exchanged contracts at £16.5million representing £4,034 per sq ft – not quite beating the record of £4,437 achieved in Egerton Terrace in 2013, but a remarkable figure nonetheless.

This is perhaps indicative of the retreat to quality – buyers can afford to be choosy and anything that is deemed secondary in terms of location is struggling to sell unless priced very competitively.  

The increased cost of Stamp Duty Land Tax in April is proving to be a major hurdle as it is now at a ridiculous level and far more of a deterrent to buyers and especially investors than fears of Brexit. We had it on good authority that it was not going to change in the Chancellor’s Autumn Statement, but Philip Hammond should seriously consider making changes to what is really a tax on mobility. The bare facts are that on a £5million ‘only’ home, SDLT is £513,750 rising to £663,750 if a second home. This highlights the fact that the cost of Stamp Duty payable is often the equivalent of renting a similar quality home for two years and, with no price growth in London forecast until 2019, there is precious little urgency for buyers to commit to a purchase now unless they really need to or they can pick up a property at below market level.

This is where overseas buyers win out as with the pound having dropped against many other currencies we have seen buyers emerging from Turkey, China, Singapore and the Middle East often buying homes with cash, at discounts of 10% or more, as a London pied a terre or for children coming to study here in the UK.

Sellers meanwhile are often reluctant to sell unless they are getting the price their property was worth at the peak in November 2014, so are often renting out any surplus home or are sitting tight until the market recovers.

No-one yet knows what ‘Brexit’ really means and we cannot predict the outcome or indeed the impact on London and its property market. No doubt the picture will gradually become clearer over the coming months. Whatever happens politically, there is no doubt that London will always be one of the most favoured capital cities in which to live - we have the language, the educational facilities, the culture, a good legal system, low interest rates and, hopefully, it will continue to be a safe place to live.

It would be a very clever person to predict exactly the low point of any market cycle but it is not very long ago that we had doom and gloom after the financial crisis in October 2008 and by April 2009 the market was on the rise again. Perhaps the message here to buyers is that it often pays to be a contrarian so, if you like a property and it suits your circumstances now, go for it!

*Source: Savills