Fri, 14/02/2014 - 06:06
Prime Central London (PCL) residential property sales contributed GBP0.5bn in stamp duty in 2013, 14 per cent of the total take, despite representing just 0.8 per cent of all UK transactions, according to London Central Portfolio (LCP).
Annual property price growth across the country, which removes seasonal distortions, was 3.5 per cent for the year, bringing the average property price to GBP247,549 for England and Wales.
Transactions, on the other hand, saw a sharp increase, rising 19 per cent to 747,479, their highest level since 2007. This may be attributed to increasing economic confidence with more availability of credit as well as Chancellor Osborne’s flagship help-to-buy scheme boosting first-time buyer numbers.
With both prices and transactions on the rise, LCP believes the government needs to urgently turn its attention to the looming stamp duty crisis, before positive growth hits a brick wall again. Average prices are edging ever closer to the threshold at GBP250,000 where stamp duty leaps from one per cent to three per cent and tax increases from GBP2,500 to a punitive GBP7,500. Indeed flats, which are more likely to be new-builds, now represent 18 per cent of the market and saw average prices breach the threshold in Q4 2013, at GBP250,389.
In Prime Central London (PCL), the market continues to experience upward price growth at 12.3 per cent. This is well below the 18.2 per cent witnessed in 2007 just prior to the credit crunch and the 16.5 per cent in 2010 when the market quickly recovered. However it is closer to the long term trend of nine per cent pa seen over the last half century.
Like England and Wales, transactions in PCL increased again in 2013, breaching the 6,000 mark for the first time since 2007.
The PCL houses sector, notoriously volatile due to its tiny size and huge price diversity, put in an exceptionally strong performance this year. Nearly 1,000 houses were sold, an annual increase of 19.4 per cent. The average price of a house in PCL now stands at GBP3,335,278, a new high.
Naomi Heaton, CEO of London Central Portfolio, says: “Headline average prices in PCL are becoming increasingly distorted by 'super prime’ transactions as top-end deals mask changes in underlying average prices. The flats and maisonettes sector is far more indicative of the market as a whole as 82 per cent of all sales fall into this category. This means the 'true' average price of property in PCL is actually much closer to the GBP1.1m average for flats and maisonettes.”
With the main drivers for growth still in place for PCL – a safe haven, a cultural, financial and educational centre – LCP predicts continued upward price appreciation in 2014. The specialist residential asset manager forecasts price rises of 5.5 per cent across the year.
This reduced growth level reflects the continued correction of prices to the long term trend line of nine per cent pa and the short term suppression likely to be inflicted by the implementation of CGT for non-resident buyers and uncertainly in the marketplace in the lead up to the General Election in 2015. With an impending Lib-Dem/Labour Mansion Tax on the cards, a ‘wait and see’ attitude may be particularly evident towards the close of the year.
Heaton says: “The government needs to consider its position carefully at the 2014 Budget. PCL is a tiny area which represents a negligible 0.8 per cent of all transactions in England and Wales, yet the stamp duty it generated last year was 14 per cent of that raised in the rest of the UK, equating to 16 times more per property and contributing close to a mammoth GBP0.5bn. We should welcome this top-end investment as a core plank in our economic growth strategy. Further dampening measures could be highly detrimental to the UK’s recovery. With this in mind, it would make logical sense for the Chancellor to support the top end of the market in his statement, which could fund a relief from the three per cent stamp duty threshold for the average UK home buyer.”
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Mon, 31 Aug 2015 00:00:00 GMTPh. D / Quantitative Researcher - NYC
Mon, 31 Aug 2015 00:00:00 GMTInvestment Banking Restructuring Analyst/Associate
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