After a subdued first quarter of 2015, there were high hopes that once the General Election was out of the way London’s residential market would really take off. However, the post-election boom predicted by many commentators didn’t transpire, other than for a brief flurry of deals in the days immediately following the poll — a “phantom bounce”. Chestertons saw an increase in buyer enquiries, but this didn’t translate into a corresponding leap in completed sales or rebounding prices.
There was a notable increase in exchanges in April, which could just reflect delayed deals finally being signed, but might also be a sign that vendors were keen to sell before the election and avoid the risk of a dealing with a possible Mansion Tax. After the election buyers — especially owner-occupiers — still sought to secure value, but this was typically most easily found away from prime central locations.
It would appear that the reason for pre-election market lethargy wasn’t just the threat of Labour’s Mansion Tax and rent controls, but also involved a degree of concern that prices were already reaching a peak, and in some places were in fact overinflated. This was exacerbated by the impact of the revisions to Stamp Duty. Properties above £1.325 million are now £10,000 more expensive, while those buying properties above £2m are
paying more than £53,000 extra Stamp Duty than before the reforms.
After May’s poll, the gap between vendors’ hoped-for selling price and buyers’ best offers persisted, and if anything actually widened. Many sellers clearly believed the media hype that the market would rapidly resume its upwards trajectory once the Tories secured their surprise majority and swept Labour’s property proposals off the table. What actually transpired was that purchasers showed little or no urgency to rush into deals while sellers, for the most part, refused to give ground on asking prices. Those wanting a quick sale often needed to reduce their asking price significantly and indeed price reductions rose by more than 70% across the first half of the year compared to the corresponding period in 2014.
Though the number of exchanges in Q2 was 23% higher than in the previous three months, this fails to adequately describe the underlying sluggish nature of the market in London; compared to the corresponding period in 2014, exchanges were actually 14% down. Monthly exchange numbers in the year to date actually peaked in April, and then declined in the second two months of the period as the post-election “phantom bounce” failed to turn into anything tangible. Other indicators also illustrated the market torpor: the number of people registering as buyers in the second quarter was 13% down on the previous quarter; viewings were 7% down and the number of houses on the market rose by 2.5% as the buyers failed to flock.