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Stamp Duty will impact PCL market more than Brexit
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
An interesting new investigation has looked at the impact of both Stamp Duty changes and Brexit on the prime central London housing market.
The research from Knight Frank suggests that additional Stamp Duty charges brought in on April 1st is more of an issue for the prime London market than leaving the EU.
However, the Brexit vote has moved to create a short-term period of uncertainty, which as a result is affecting behaviour in the region.
Falls
House price values fell by 1.5% in comparison to one year ago, with the number of new buyers slipping by 6.2% in the same period. In addition, the number of exchanges were down by 10.5% during the first six-months of the year, but viewings rose by a substantial 40.8% compared to 2015.
The below £1m market saw annual price growth of 1.1%.
Tom Bill, head of London residential research, suggests that early indications are that the Brexit vote will reinforce price trends.
During June 2014, yearly price growth in prime central London was 8.1%, the last peak for prices in recent times. Growth then fell steadily to -1.5% in July 2016.
Bill notes, ‘this slowdown was a natural consequence of strong price rises between 2009 and 2013, however the process was accelerated by two stamp duty increases and a series of other tax measures.’[1]
Stamp Duty will impact PCL market more than Brexit
Impact
Continuing, Bill said, ‘despite the widespread media coverage devoted to the EU referendum and its potential impact on house prices, the primary factor curbing demand in prime central London remains stamp duty. The result of this two year slowdown is that vendors had already begun to adapt to the new pricing environment and in many cases Brexit has been a trigger to make overdue reductions to asking prices.’[1]
‘Indeed, had the result of the referendum been a victory for Remain, it is likely there would have been a similar mismatch between expectations and reality that followed the 2015 general election. Following the formation of a majority Conservative Party government, high stamp duty costs acted as a brake on demand that was widely expected to surge. Since the vote, a number of buyers have requested discounts due to the climate of political and economic uncertainty,’ he added.[1]
Mr Bill also said, ‘however, where the asking price was set an appropriate level before the vote, deals are proceeding with no reductions. In other cases, the Brexit vote has encouraged vendors to show increased flexibility. It is too early to say whether the reductions are likely to trigger higher transaction levels.’[1]
[1] http://www.propertywire.com/news/europe/prime-central-london-sales-2016081112252.html
