Sales of homes in prime central London improved towards the end of 2016 says Savills - but only after prices were reduced to take account of what the agency calls “buyer expectations of value” in an era of political and economic uncertainty, and high stamp duty.
The agency says average house prices across all prime London fell 2.2 per cent in the final three months of 2016, leaving values down 4.9 per cent over 2016 as a whole and down 12.5 per cent in total since the December 2014 peak - just ahead of the impact of stamp duty reforms introduced by the then-Chancellor George Osborne.
By contrast in outer prime London - where the average value of prime properties is just below £2m - prices fell a more modest 4.0 per cent in 2016 and are just 2.7 per cent down from where they were two years ago.
“We saw a real dearth of transactions over the late spring and summer months following the race to beat the new three per cent surcharge [in April 2016]. But further price adjustments, coupled with the currency play for international buyers, appear to have triggered greater buyer commitment and prime London sales volumes picked up significantly in September, October and November before easing back in December” explains Lucian Cook, Savills’ UK head of residential research.
According to data from Lonres, central London sales of properties worth over £1m were 21 per cent down year-on-year in 2016. In the three months to the end of July, transaction volumes were running at about half the same period in 2015, but in the last quarter of the year had recovered to within 16 per cent of 2015 full-year numbers.
Savills says that its own market intelligence suggests that from January 2016 to the end of November there were around 320 sales worth over £5m in London; in volume terms, this was 17 per cent below the same 11 month period of 2015.
In the highly rarified atmosphere at the top end of the market, there was actually a strong performance in 2016. In the 11 months to the end of November £1.43 billion was spent on properties worth over £20 million compared to £1.07 billion in 2015.
“Buyer sentiment remains fragile. Improved transaction levels are the result of adjusted pricing and should not be seen as a precursor to price rises in the foreseeable future. High stamp duty rates and the uncertainty created by negotiations to leave Europe will still need to be factored into expectations on value” warns Cook.
Here is Savills' forecast for the 2017 market, as we reported in November.