Prime London property prices to decline due to taxes and Brexit
The nature of London property prices are always under the spotlight and it has seemed that prime London property prices have been continuously rising for some time. However, 2016 was an eventful year in the UK and many factors impacted on the UK property market. A combination of higher taxes relating to the property market and the continued uncertainty over Britain’s exit from the European Union has led to many sellers of high-end London property being more realistic in their expectations and what they accept in offers.
A recent study indicated that prices for the high-quality properties in the heart of London dropped by 6.9% in comparison to the previous year’s figures and the figures fell by 4.9% when all of the property sales in London were included.
As always though, there have been justifications for the changes in the market and there were two key factors that have likely influenced buying and selling behaviour. The introduction of the additional 3% stamp duty for people buying a second property, which came into effect in April of 2016 had a big impact. Quarter 1 sales in 2016 spiked dramatically as investors and landlords rushed to buy homes at a cheaper rate, which also saw many sellers moving forward their plans to sell property. After this, there was a natural lull in the market, which rolled into the build-up to the European Union Referendum vote.
Big decisions impact on the property market
Any time there is a major vote which is likely to impact on the economy, the property market suffers. Given that people would rather know what their likely economic outlook is before committing to buying property, this is understandable. Of course, after the Brexit vote, the value of the £ has plummeted and even in early 2017, we are no closer to knowing what the future holds with respect to Brexit. It finally looks as though more people are getting on with their lives but there was a notable drop-off of activity in the property market, especially the prime London property market, in the wake of Brexit.
An example of how the higher-end properties were hit in 2016 in London can be seen with the fact that the number of properties sold for more than £1m fell by 21% compared to the previous year’s figures. However, the higher up the market you went, the lesser the impact appeared to be. Properties which sold for a value of more than £5m were only down by 17% compared to 2015 figures and properties which were sold for more than £20m actually rose, with £1.4bn being spent compared to a figure of £1bn for the previous year.
There is also the fact that the company who undertook the research which suggested the fall of 6.9% had previously predicted that the market would fall by 9%, so the fall was less than many analysts were tipping.
Lower prices in London will be a positive state of affairs for many people but it is believed that 2017 will see London property prices rise again.