The latest analysis from real estate firm Savills has provided good news for London’s prime housing market, revealing that property values rose by 1.6% in the three months to the end of June. However, further investigation suggests that levels are still down 0.7% from last year.
An increase in stamp duty rates and stock levels remaining unsold led to values becoming restricted following May’s general election. In addition, the report suggests that caution amongst buyers at the top end of the market is also high, with net price growth rising by just 0.3% for the capital’s prime central market. House prices in this market were also found to be 4.3% down year-on-year.
‘The stamp duty increases introduced in December 2014 mean they now also looked fully taxed, despite mansion tax fears being confined to history,’ commented Lucian Cook, head of UK residential research at Savills.
Cook seems to have a point, with homes worth in excess of £2m across the rest of the prime London market seeing values dip by an average of 0.9% over the past twelve months. More positively, prices rose by 2.4% in the three months to June.
Prime London property prices up…and down
‘In the early part of the year we could put buyer reluctance to commit down to political uncertainty pre-election,’ Cook continued. ‘Only now is the dual effect of taxation at the top end of the prime market and mortgage regulation at entry level becoming clear.’
Cook went on to note that, ‘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.’
‘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.