Becky Fatemi of central London estate agency Rokstone says prime areas of the capital are to suffer a “prolonged phase of stagnation” and sellers will have to reduce asking prices to secure deals.
“Confidence is down and people are confused about which way the market is going – there doesn’t seem to be one rule or formula for the London market going into 2017” she says in her company’s end of year review.
Fatemi says stamp duty is one reason - but only one reason - why prime London is so depressed and is likely to stay that way for some time.
“I have a client who wanted to move from an apartment in Marylebone to a family-sized house in Queens Park but the stamp duty amounted to £250,000. She will therefore make do with the flat. In that instance the economy has lost a sale, a purchase and HMRC has sacrificed the stamp duty” she says.
However, the Rokstone boss also blames pre-2015 general election debate about a mansion tax and then this summer’s Brexit EU referendum result. “This quashed buyer appetite at a point when prices were naturally correcting” claims Fatemi.
“Caution on the part of both buyers and sellers created a lack of urgency. Some vendors who would have sold following a vote to remain in the European Union decided to sit tight to see which way prices go, and many buyers became far more wary on price. We are waiting to see where the penny will drop – there is a lot of window-shopping going on right now” she says.
Fatemi insists that what she calls “a new buyer” has emerged because of the slow market - one who wants to see a discount thanks to high stamp duty and moving costs, and recognising weaknesses in the economy and the threat to City of London jobs, which remains a strong influence on prime buying patterns.
However, Fatemi notes that the current type of seller is less likely to discount.
“There is no incentive to move their money out of real estate, it attracts barely any interest elsewhere, and therefore no pressure to sell, unless of course there is a lifestyle imperative such as relocation for work. In fact, in prime central London the cycle of selling has extended from every five years to every eight years slowing churn” she adds.
“We are entering a period of stagnation in terms of volumes and therefore price. Prices will come off in the first half of the year to the point when such falls wake the market up again.”