The snap General Election on June 8 adds to uncertainty but does not significantly worsen the market for prime properties in London and rural areas according to high-end agency Savills.
In its latest prime country and London market assessment, the agency says its previous assumptions of continued economic and political flux have merely been confirmed by the additional unexpected event of a new poll.
“Our forecasts anticipate two years of lacklustre price growth during the Brexit negotiations, particularly in the prime markets of London which are most price sensitive,” says Lucian Cook, Savills head of residential research.
“The election is unlikely to shift that picture dramatically unless it brings the disruption of a change of government. Post election, consistency of government throughout the Brexit process has the potential to be a steadying influence on the market” he adds.
“And however highly taxed the top end of the market now is, it will need to continue to need to absorb high rates of stamp duty. For now we believe that stamp duty reform is at best a possibility rather than a probability.”
Savills says prime central London values are 13.2 per cent below their 2014 peak, achieved before George Osborne’s stamp duty overhaul. “Increased exposure to capital gains and inheritance tax for international buyers has also tempered demand, while the Brexit effect has compounded the general cooling across prime London as a whole” the agency concludes.
Prices across other prime London areas outside of the centre fell by 3.9 per cent in the 12 months to the end of March this year but even so are only 2.7 per cent below 2014 peak.
But there’s much worse news across all of central and ‘other’ prime London for homes worth over £10m - they have lost 15.5 per cent of their value since their 2014 peak, while those worth less than £1m have retained their value.
“Sellers need to adjust their expectations of value to bring them into line with buyers’ expectations,” Cook says. “Prime central London vendors appears to have understood this and price cuts have begun to bring buyers back in to the market. In the rest of prime London, the gap between buyers and sellers remains wider, contributing to a pool of overpriced stock. Further asking price cuts will be required.”
Savills says a slower London market has stemmed the flow of housing wealth out of the capital, but 46 per cent of Savills prime regional buyers came from London last year, compared to 37 per cent five years earlier, suggesting more buyers are attracted by what the agency calls ‘the value gap’.
All regions are now showing positive price growth, though prices are up just 1.3 per cent over the past year and 8.5 per cent in the past five. But Savills says there are some real extremes in the market, between different locations, price bands and type of property.
In the North of England and Scotland prices remain well below their pre credit crunch peak, at 11.4 per cent and 14.2 per cent respectively over the past 10 years, compared to growth averaging 41.2 per cent across prime London.
Even in the prime suburban markets, values have risen just 10 per cent since 2007, representing real value for buyers who benefited from post credit crunch growth in London.
Prime regional buyers have increasingly favoured well-connected urban locations such as York, Chester, Bath, Bristol and Edinburgh. As a result, townhouses are worth an average 26.7 per cent more than 10 years ago, and values rose 3.1 per cent year on year.
By contrast, country houses priced over £2m have seen values fall 10.9 per cent in the past decade, including a 1.1 per cent drop in the year to the end of March 2017. However, Savills says these larger homes represent relatively good value and this is attracting some high ticket buyers back into the market.
In the £3m-plus price range Savills saw new buyer numbers rise by two-thirds in the first quarter of 2017 compared to the same period in 2016.