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Written by rosalind renshaw

The spectre of a ‘zombie’ property market in London until after the next election has been raised by agent Ed Mead.

Mead, a director of Douglas & Gordon, said there has been an ‘inexorable’ decline in stock levels, with inventory down 22%.

However, applicant levels have remained steady, he said, and the launch of the Help to Buy scheme has led to increased viewings.

He said that if overseas owners of London homes are made to pay Capital Gains Tax, as seems a likely move by George Osborne, then fewer would put their properties on the market, resulting in even less stock to sell. Given that many overseas owners do not actually live in their London homes, he said this would add to the zombie effect.

Mead said: “The October market was far busier than this time last year. The publicity surrounding the market and Help to Buy has helped fuel a 20% rise in viewings and it does feel a lot busier than it did in September.”

He added that asking prices in London appear to have over-shot, but that some sellers are beginning to think they might have to cut prices.

He went on: “Discussions around overseas owners potentially having to pay CGT is unlikely to produce more sellers, given the paucity of alternative investments available. In fact this could result in even fewer properties being sold and a zombie market emerging until after the next general election.
“By that I mean no meaningful activity, a market sort of sleepwalking onwards with no real purpose, and in prime Central London, a market that is creating a lifeless area as no one actually lives there.”

Meanwhile, the extraordinary boom in London is continuing to gather steam, with rising prices fuelled by shortage of stock.

One agent reported that a seller with nowhere to move to has agreed a two-year completion with their buyer.

Another, Marsh & Parsons, says that prices of one-bedroom properties in ‘prime’ London have broken the half-million pound mark. The definition of ‘prime’ includes Shepherds Bush.

The latest Land Registry All Transaction Data shows that average house prices in prime central London stood at £1,484,597 in the third quarter of this year, while the number of transactions fell to 1,322 to hit their lowest level since the second quarter of 2008 – the depths of the credit crunch.

According to Marsh & Parsons, the average price of a one-bedroom home in prime London is now £502,139, a rise of over £60,000 – or 14% – in the last year.

Peter Rollings, CEO of Marsh & Parsons, said that buyers, far from being deterred by the prices, are spurred on by the capital growth.

“Competition for one-bedroom properties is fierce.”

He said that the number of applicants has risen by 6% in the last quarter. While there has been an increase in supply, it is still at an historic low with inventory 17% less than a year ago.

At W.A. Ellis, residential sales partner Richard Barber said that sellers wishing to stay in London are cautious about putting their homes on the market.

He said: “There is an understandable hesitancy when there is little choice for them to move to. As a result, we have seen some unusual compromises.

“A recent sale has seen an exchange with a two-year completion to give the seller ample time to find the right property to move to. If this only takes a couple of months, the completion date can be brought forward, but the price is committed and it focuses the mind of the vendor to find the right property.”

The Land Registry data, analysed by London Central Portfolio, shows that transactions in prime central London have shrunk to 48% below the market average since 1996.

Naomi Heaton, of London Central Portfolio, said that the Land Registry showed up the “alarmist” nature of the latest Rightmove report, which said that London asking prices rose by 10.2% in just one month.

She said that the Land Registry’s “actual” prices show inflation no more than the long-term annual average of 9%.

But she conceded that with the number of sellers continuing to fall, there will be more pressure on prices.


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    • 12 November 2013 12:04 PM
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