Crown Mayfair Market Review – Q4 2015November 19, 2015 1:17 pm
Crown Mayfair Market Review – Q4 2015
With Q4 underway and Christmas adverts all around, it signals the drawing to a close of what has been an interesting year for UK property. From an analyst’s perspective, this time of year is a bonus in that it provides enough succinct data to analysis the past and make more reliable judgements going forward, something that the industry itself has had a somewhat tricky time with throughout 2015.
The elections, changes to legislation and changes to UK property taxation have been at the forefront of agendas all year thus far and remain on the lips of many you still meet. However in this day and age so easily affected by speculation and confidence, it pays to pay attention to the ‘real story’ or in a better sense, what is really happening on the ground. With the media, public and political furores concerning property and tax abating, one can truly observe the resilience and versatility of the London market. Where large bounces or dips are heralded, real market forces take sway and silence much of the speculation. Where certain spheres in the market diminish, others bloom and this has been evident within the super prime and the sub £1million markets respectively.
Pricing since the 2007/8 crash has seen many values in the capital soar and in areas of high prestige or demand, pricing exceed the ‘real’ market value and remain steadfast in the inflated expectations. Combined with the increase in SDLT and ATED, it is clear to see why transactions and prices have fallen in the super prime market over the past year. The middle of the market (circa £5m) has also been affected rather strongly with the increased transaction costs and proportionally higher impact on buyers and vendors.
It must be noted that what many vendors might perceive to be a negative, much of the market views the ‘normalisation’ of prices occurring within the capital as a positive factor, the amendments to taxation and legalisation acting as a catalyst for an already changing marketplace. It is however the sub £2million market that has seen positive levels of growth and truly increased demand and this is for a number of reasons to be touched upon in due course.
So at the other end of the property spectrum, as the post credit crunch foray into ultra-high value property retreats, a new wave of investment has been seen across the capital, especially in the circa £500,000 region.
As the aforementioned changes to taxation increase the costs of purchasing higher value property, many have instead turned to lower ticket, higher yielding opportunities and have chosen to look further afield than the golden triangle of Prime Central and surrounding neighbourhoods. In spite of changing legislation affecting BTL landlords; with attractive financing structures, strong growth prospects and at the end of the day, lower ticket costs, it is evident to see why agents all across the board have reported a marked increase in sub £1 million sector activity.
Thus combining the investment waves and the ripple effects from the inflated prime central pricing, it is clear to see why the ‘Prime Central London’ catchment area itself has expanded to include so many previously considered ‘periphery’ locations.
Areas such as;
- Hammersmith & Fulham along with surrounding Chiswick/Ealing;
- Wandsworth / Putney / Barnes;
- Canning Town / North Greenwich.
:have all seen a large amount of investment into new schemes and improved infrastructure. Pricing in these regions is more achievable or profitable for many and capital growth prospects for these areas are strong.
This is especially true for the latter E14/E16 with the Crossrail and Asian Business Park providing the uplifting factors to weather any potential dips in the market or possible oversupply, the likes of which have been experienced elsewhere in the capital.
Looking forward, key market drivers include;
- The government’s proposals to tax and legislation concerning foreign domiciliary and corporate structures.
- This year has seen a number of consultations, announcements and ambiguities surrounding domicile and structuring concerning UK property. Key issue here is the time frame in which the government wants to implement changes, which will likely leave many open to IHT liabilities and many benefits of offshore structuring being diminished.
- Lag in pricing and ‘expectations’ normalisation.
- There is still a disparity between buyer and seller expectations in various areas of the market. However prices have been normalising throughout the year and the general outlook sees the market flattening in favour of buyers.
- Lending and interest rate rises.
- Lending has been an issue for many since the mortgage Market review was introduced and this has affected all sectors of the market. However it is worth exploring lending options whilst rates are grounded and planning for when they go up. Shrewd investment strategies, especially in the Hotspot areas with lower tickets sizes, can provide investors with a lower exposure way to enter the London property market and have many of their costs ‘service themselves’ through multiple or timely off plan purchases .
- However for the most part, many owner occupiers will be affected and should have advice and structuring in hand for future changes. Still, when they occur, the capital’s property market resilience comes into its own, while global markets continue to be in turmoil, demand for London property remains strong and capital inflows maintain their prevalence due to the array of non-economic factors the city receives demand for.
Data credits – JLL, Savills, Knight Frank, Lonres.
This post was written by Tim Jones