Compared to the rest of the market, prime property hasn’t really been affected by the current stagnation the rest of the market is experiencing. However, this may all be about to change, according to new research from Savills.
Savills specialise in high end property transactions and they have predicted that there will be a decline in the amount of sales and that it will become steady in the next 18 months. This is because within the last year from June 2011 property prices have only increased by 6 per cent for the top 5 per cent prime properties in London. This makes it the lowest annual growth for three years.
Since 2009 prime property asking prices have peaked at a 51 per cent increase. This is because of the high demand from overseas buyers who saw prime property in London as a better investment in the midst of the Eurozone crisis and the economic climate. The areas these investors have been most interested in are Mayfair, Knightsbridge and Belgravia. This activity has been slowing however since March, when the new Budget came in and a high stamp duty on these prime properties was introduced.
There are all kinds of additional costs that come with buying any home, including property insurance and now with the high stamp duty, this is putting people off.
Mr Osborne bought in the new stamp duty to crack down on tax avoidance.
Charles McDowell is a property consultant in London and he has said “There is no doubt that there has been a slowing up of the market since the budget, basically because foreign buyers are wanted to take advice on the situation before they come in and get a house.
“The difference with the prime market and many others is that very few owners have to sell, so you won’t get any flood of supply or the impact that it would have on prices.”
There are a few ways of getting around paying the stamp duty. One way is to sign a multiyear lease that gets automatically renewed each year instead of buying a property freehold. This means that the transaction doesn’t go over the £2 million threshold for paying the stamp duty. Although the government has said they will come down very hard on those who plan to use or advertise these schemes.
Lucian Cook is the director of research at Savills and he has said, “There is a very real prospect that the prime London market will pause for breath for a period while buyers absorb the changes to the tax regime.”
He went on to add, “In addition to the tax issues, you have the fallout from what is going on in the Eurozone. On the one hand it is driving people into London housing, as they see it as a haven. On the other, things have got so uncertain that there is a propensity to do nothing at all.”