New data revealed by investment consultancy Central London Portfolio claims that transactions in prime central areas of the capital have dropped 24 per cent year on year - but with the last two quarters seeing much larger transaction slumps.
In the second quarter of this year the drop was 58.1 per cent while in the third quarter of the year the fall was 50.0 per cent. These collapses far outweigh the 29 per cent increase in sales seen in the first quarter, when there was a surge in sales caused by landlords seeking to beat the April 1 additional homes stamp duty surcharge deadline.
LCP says the number of transactions for the last 12 months stands at 3,696, one of the lowest annual figures since Land Registry began recording transactions and equivalent to the depth of the global financial crisis.
This is 42 per cent lower than two years ago, when then-Chancellor George Osborne announced his reform of stamp duty in the 2014 Autumn Statement.
However, LCP’s figures for the second half of the year appear at odds with data from LonRes, the prime central London consultancy that monitors transactions within its patch.
LonRes says that “since August, we have seen a steady increase in activity, sales volumes, while still down on 2015, were just 14 per cent lower. Indeed, in October and November buyers in prime central London spent 11% more than over the same two months last year.”
LCP says that: “Three successive stamp duty increases since 2012, resulting in a rise from five per cent to 15 per cent for some purchases, alongside other aggressive tax hits, has seen the luxury end of the market suffer a discernible price correction with marked falls in sales activity.
“While the long term outlook remains compelling as a global destination with exclusive and limited stock, it may take some years to correct with prices rebasing themselves to take account of the additional buy-in costs.”
Naomi Heaton, chief executive of LCP, also warns that the scope of inheritance tax is being widened to look through offshore structures and capture underlying UK residential property assets.
“This is likely to further impact sentiment where it has been usual for buyers to use such structures” she warns.
“For those planning to acquire higher value property in corporate structures, this will be another tax burden which could postpone purchasing decisions or lead to a decision to divest. This will undoubtedly slow the recovery of the top-end of the market until buyers get used to the new normal”.