The final quarter of the year is often slower due to Christmas and the run-up to the holidays and 2016 was no exception.
Supply and Demand
London's property market proved surprisingly resilient over 2016 as a whole, especially considering the turbulence created by the stamp duty surcharge introduced in April and the EU referendum result in June. The final quarter of the year is often slower due to Christmas and the run-up to the holidays and 2016 was no exception.
Exchanges over the quarter were also 3.4% lower (down 11% year on year) but there was an unusual yet encouraging pick-up in December, which saw a 19% increase compared to November and early signs that this momentum would be sustained in January. Another sign that January was set to be a strong month was that the number of properties available for sale at year-end was 18% higher than 2015.
Exchanges were driven by two key factors: firstly, price reductions which rose by 70% over the year and helped to compensate buyers for the increased stamp duty liability and the perceived "over-pricing" of many properties. Secondly, some buyers and sellers showed that they were no longer willing to wait for the fog to lift on Brexit and decided to commit to deals.
The pound fell by 17% against the dollar in 2016, but despite the discount that this offered foreign buyers, the anticipated surge in overseas buyer activity did not materialise. This suggests that even with the effective discount being offered by the weak pound, foreign purchasers are just as price sensitive as UK buyers and similarly inclined to look outside central London for better value opportunities. There was also an element of concern about Brexit and what that might mean for their investments in the shorter term. This had a considerable impact on the prime central locations where transactions in 2016 in some areas were down by over one third.