Prime Central London (PCL) house prices will grow three per cent in 2014, followed by two per cent 2015, according to a leading London property consultancy.
After the forthcoming general election however, consultancy Strutt & Parker predicts prices in PCL to rise 6.5 per cent in both 2016 and 2017. Meanwhile, its predictions for homes across the UK as a whole are more bullish – nine per cent growth in 2014, followed by five per cent throughout 2015.
These forecasts are a stark contrast to 2010 and 2011 when PCL prices surged by over 13 per cent year-on-year.
Whilst improved economic foundations would certainly suggest that prices will continue to rise over the next few years, the biggest perceived uncertainty surrounding the property markets over the remainder of 2014 and 2015 will continue to be the looming election.
Stephanie McMahon, Head of Research at Strutt & Parker, explains: “Agents are reporting a continued slowdown in some areas as buyers and sellers nervously await news on the upcoming General Election and the potential for Mansion Tax. This is beginning to feed through into transaction levels. As is often the case in uncertain times, it may also be that transaction levels will decrease in the run up to May 2015, but values could hold up better than expected.
“Above and beyond the General Election there are a number of other potential headwinds slowing the property market, including talk of interest rate changes and the Mortgage Market Review (MMR) and the slowdown it is causing.”
“The main driver for price market price growth in recent years has indeed been the consistent shortage of good quality housing stock in highly sought after prime locations. Any future increase of supply to the market in central London would therefore put downward pressure on PCL house prices and we have taken this into consideration in our London predictions.”
There are bargains to be had in Prime Central London if you look beyond stamp duty, an independent property consultant with more than 25 years’ experience said in October.
Following the 2012 budget, stamp duty for properties sold over £2million rose to seven per cent. Since this announcement, sales of homes in the £2-£2.5million price bracket have fallen by over 30 per cent, but in contrast, homes valued under £1.5million fell by just 3.4 per cent, according to agencies’ analysis. Additionally, more than half of all properties in London’s Prime Central areas have been withdrawn unsold in the six months to the end of June, according to further research.
A leading property consultant commented “The £2-£2.5m sector of the market provides a real buying opportunity because people are reluctant to pay more stamp duty. There is a real psychological barrier to passing this mark, despite ability to access the £2-2.5m market – where we are seeing some significant reductions in price.
“Recently, a client of mine provided me with the brief – a three bed investment property in the Knightsbridge area for less than £2m. Knowing the clients taste I knew it was going to be tough, finding a two bed with his requirements would be achievable but a three bed would be a stretch.
“After showing him properties on the market in line with his brief, we had a frank discussion about surpassing the £2million mark. Soon after, I took him to see a £2.5million property, which was being sold off market which he wanted to put an offer in for. Following tough negotiations, the property was brought for £2.1million. This deal was possible as this area of the market, £2m plus, has slowed right down and in order for vendors to sell they have to be realistic about market value. Buying agents, like myself, are far better placed than estate agents to secure these deals as we prefer to work off market as we aren’t representing the vendors.
“With Labour plans for a Mansion Tax now in the open, it’s likely that properties above £2m are likely to see further reductions, so I expect to be able to identify real value for clients looking in this range.”