The prime residential property market across London continues to struggle. Changes to Stamp Duty have had a negative impact on sales of high-value homes, with buyers seeking price cuts to offset the increased tax. Properties over £1.4m attract nearly 20% more in stamp duty under the current system; for properties above £2m the tax bill is around 54% higher than it was in 2014.
Buyers are very keen to drive a hard bargain, while sellers are reluctant to accept cut-price deals, a situation not helped by some agents overvaluing properties in order to win instructions – a tactic which often delays a sale and usually results in a price reduction.
Investors meanwhile are suffering from low yields and flat or falling capital values. They also face the prospect of increased costs arising from new legal requirements introduced since summer, plus a reduction in mortgage interest relief over a four-year period beginning in April 2017 for higher-rate tax payers.
The effect of these changes on the Mayfair market is demonstrated by the fact that sales in the first seven months of 2015 were around 20% lower than in the corresponding period in 2014, according to Land Registry data, while the average recorded sale price was £2.82m compared to £4.17m in 2014.
With the 3% stamp duty surcharge on second home and buy-to-let purchases from April 2016, we expect to see more homes coming to market, which may push prices in Mayfair down. The shrewd investor should look to acquire keenly priced properties ahead of the introduction of the 3% stamp duty surcharge from 1st April. With this we should see a slight increase in activity in the £1-2 million market.
Could there be a flurry of activity? It’s too soon to say, but now is the crucial time to appoint a strong agent who has a clear plan how to get you the best price in turbulent times.