Humbert’s has heralded its return to Prime Central London by calling the bottom of the market. “We are calling the bottom of the market in April 2017,” declares the firm’s head of its new London division, David Adams, joining voices – albeit slightly less emphatic ones – from Savills, Knight Frank and JLL in flagging a turning point for the Golden Postcodes.
The formerly-country property firm has just announced a return to PCL, launching a significant new office on Berkeley Square and recruiting the Managing Director of John Taylor UK to run the show; read all about the launch today on PrimeResi here.
As the new office opens its doors, the agency is expecting property values to stop falling and transaction numbers to pick up. “On the basis that consecutive price reductions have stopped, walk-in enquiry has measurably increased and houses on the market for two years are now going under offer across all price brackets, we are calling the bottom of the market in April 2017 within Prime Central London,” said David Adams, Humberts’ new London Director.
Savills recently posed the question “Could this be an early indication of values bottoming out?” after discovering that the pace of price declines in PCL “notably slowed” in the first three months of this year, while Knight Frank’s research bods said that “trends in price growth in central London are pointing towards an end to the falls we saw in 2016.” JLL, looking more to the new-build sector, has noticed some “green shoots” emerging in PCL as higher SDLT bills are “assimilated” into the market.
While the impact of successive stamp duty changes are still “curtailing” activity, Humberts says that it looks as though vendors are beginning to wise up and price more realistically – and to take hits on ambitious asking prices. “The difference between asking and achieved sales prices is at a historically wide margin,” notes the firm. “Indeed, the differential between asking and sales price is currently more than compensating buyers for stamp duty costs. For most of 2016 and early 2017, the price reduction has even been enough to compensate buyers for the 3% levy on second homes. Price reductions are helping make stamp duty more palatable. More realistic prices are helping the market to move forward.”
There has been an eight-fold increase in average PCL prices since 1995, versus a 63-fold increase in tax payable (or 87-fold increase for a second home)
A bit more on those stamp duty shifts: there have been eight changes to SDLT since 1995 – when the average Prime Central London price was £260,000. Back then, when John Major was in charge and Oasis/Blur were popular, the total stamp duty bill on that average PCL property was 1%, or £2,600. In 2016, the average price of a property in PCL was £2.1m, with stamp duty of £163,000 (an effective tax rate of 7.9%). If this is a second home, the stamp duty rises to £226,000 and an effective tax rate of 10.9%.
Humberts points out that that means that there has been an eight-fold increase in average PCL prices since 1995, versus a 63-fold increase in tax payable (or 87-fold increase for a second home). Coincidently (surely), transaction numbers have dropped by a fair bit over the same period…