Only properties that are priced realistically in the prime central London market are selling as the sector has been impacted by tax change, according to the latest analysis.
Sales have seen an uplift of 4.6% from British buyers in the third quarter of 2016 but overall both the volume of sales and selling prices are down by 47% compared to the third quarter of 2015.
The analysis report from agents Strutt & Parker says, however, that this sector is still attractive to overseas buyers despite Brexit with a slight rise in those coming from Western Europe and Asia compared to the second quarter of the year.
‘The low volume of transactions is indicative of a market where only properties at realistic prices with motivated sellers are completing,’ said Charlie Willis, head of London residential at Strutt & Parker.
‘We have seen a noticeable increase in viewing from committed buyers, throughout later September and October, and this has led to an uptick in transaction volumes. Particularly where sellers have been realistic and adjusted asking prices according to market sentiment,’ he explained.
He also pointed out that the recent fall in sterling against certain currencies following the Brexit vote, particularly the dollar and the Swiss franc, has definitely been a major contributing factor to the increase in buyers from Europe and Asia since June.
‘For overseas buyers, this currency play instantly wipes out the formerly prohibitive cost of 15% stamp duty on the most expensive properties,’ he added.
The report predicts that sales in the prime Central London sales are likely to be down by 10% in 2016 and be flat at best or down 5% in the worst case scenario in both 2017 and 2018 before picking up in 2019.
But the current economic conditions and the extra 3% stamp duty for additional homes are also having a combined impact on the prime central London lettings market which is 36% down compared to the third quarter of 2015. However, in Knightsbridge and Belgravia volumes were up 10% compared the second quarter of 2016.
‘Despite volumes of lettings transactions being down year on year we have seen tenancy length increase, as well as a surge of demand in super prime with transactions up 50% year on year in properties over £8,000 per week,’ said Kate Eales, national head of lettings at Strutt & Parker.
The report predicts that prime central London lettings volumes are likely to be stagnant in 2016 and 2017 before increasing by 2.5% in 2018, 2019 and 2020.