Prime London property sale volumes down for eighth consecutive quarter
The number of sales in so-called prime central London (PCL) locations have continued to fall, with the number of sales falling for the eighth consecutive quarter, according to the LonRes Residential Review for winter 2015/16, with 22% fewer transactions in 2015’s Q4 compared with Q3.
The market for propeties valued at over £5 million was hit hardest with transactions in prime and prime central London both down over 50% in Q4 2015 compared with the same period in 2014
However LonRes state the market for £2 million to £5 million was not as badly affected with transactions down “a modest 6%” in the same period.
Looking ahead to the rest of 2016, the report says: “More than half of agents reported increased interest in the market under £1 million in the final months of 2015, perhaps an indication of buyers looking to complete on their investment or pied-a-terre purchase before April. After this, the market may quieten again as the factors of overpricing and increased tax which dampened the market in 2015 come to the fore again, particularly in central parts.
“Two-fifths of agents see the upcoming extra stamp duty costs as the greatest threat to demand. A further quarter think that the ongoing effect of the stamp duty reform in December 2014 will be most detrimental to demand levels. With demand set to remain subdued, over half of agents expect 2016 transaction levels across prime London to be lower than in 2015.”
Despite the fall in volumes, according to the review government revenues for Stamp Duty Land Tax (SDLT) have actually increased by 0.7% due to recent reforms.
When it comes to explaining falling volumes, the report states: “It would be easy to single out last year’s SDLT changes as the catalyst for the fall in transaction numbers. However the slowdown, in sales at least, pre-dates the introduction of the new stamp duty regime. Indeed, stamp duty hikes have only added further pressure to an already slowing sales market. In 2014, before the introduction of the new SDLT rates were announced, transactions levels had already fallen by 18% compared with volumes the previous year. In 2015 transactions fell further. In 2015 21% fewer homes changed hands compared with 2014 and were 33% down on 2013.”
Despite the fall PCL volumes, the number of sales in “prime fringe” (SE1, SE11, SW4, SW5 etc) London increased, up 7.7% year on year, the only portion of central London to see growth. The area also saw a 4.7%
Jonathan Stickells, Head of Valuation & Advisory, Residential has also identified new trends in Office to Residential conversions said: “Office-to-residential conversions are nothing new in PCL – 1,895 units are currently under construction on former office sites in the boroughs of Kensington & Chelsea and the City of Westminster alone, which remains largely unchanged from 12 months previously. Recent planning legislation has pushed them back into the limelight, delivering new housing schemes without the need for protracted planning processes.
“In PCL, the focus has been on re-conversion. Many newly converted properties were originally built for residential use, comprising substantial properties of extensive lateral proportions and period features. Whilst these features maximise appeal to international high net worth purchasers, their more discrete locations also make them popular with British buyers.”