Buyers have been in restrained mood as they digest a rise in stamp duty and global economic events this summer, though activity is slowly rising, says Tom Bill.
Demand in prime central London was unsurprisingly restrained in August.
It is typically one of the quieter months of the year, however this seasonal trend was compounded by the fact buyers have been coming to terms with higher stamp duty and uncertainty in global financial markets.
The uncertainty caused by China’s currency devaluation is examined in the Macro View, however the effect on the prime central London property market has been twofold. One the one hand, it has caused some buyers to postpone decision-making until there is a greater sense of certainty.
On the other, there is evidence Chinese buyers have stepped up their interest in ‘safe haven’ global property markets like London and are increasingly looking for homes in ‘golden postcode’ neighbourhoods like Mayfair, although it is too early to discern any impact on transaction levels.
Against this backdrop, annual price growth fell to 1.7 per cent in August, the lowest rate since November 2009, eight months after the market had bounced back from its post Lehman Brothers low point.
Prices were flat compared to July and rose 0.8 per cent over the last three-month period. However, annual growth is largely flat at 0.4 per cent when the newer prime central London markets of Islington, Riverside, City & Fringe and Southbank are removed, which shows how the events of the last 12 months have had a greater impact on longer-established higher- value prime central London markets.
The uncertainty has also had an impact on sales volumes though transactions have begun to pick up again since December’s surprise increase in the rate of stamp duty for properties worth more than £1.1 million, as figure 2 shows.
In the run-up to the election between January and April, transactions excluding new-build properties were down by an average of -48 per cent compared to a strong 2014 but the gap narrowed to -20 per cent in the three months between May and July.
The seasonal nature of the market dictates buyers will become more active in the autumn and a greater sense of normality will return to the market, which will also be driven by the fact vendors are lining up new properties for sale.