2016 sees slow start to London’s Prime property marketApril 28, 2016 1:15 pm
Whilst spring is often one of the busiest seasons of the year for the London property market, the various taxation changes and subdued political sentiments have left 2016 off to a ‘slower’ start than usual. As with previous elections and key political events, uncertainty breeds apprehension and many purchasers choose to wait until the markets have unfolded and corrected. However the current state of affairs still allows for confident buyers to make astute purchases.
Market sentiment and speculation around Brexit has led to a weakening of the Sterling against major currencies such as the US Dollar and Euro, consequently providing greater purchasing power in a UK market already veering in the foreign buyer’s favour. These relative FX improvements for those with foreign currency denominated holdings have enabled purchasers to make extra savings on residential and commercial acquisitions. We has seen a number of £20m+ buyers enter a market where combined FX savings and reduced prime central asking prices have helped to mitigate the SDLT increases that many commented would stifle the industry. As polls foresee slimmer chances of the UK leaving Europe, confidence in the pound is returning. This reduced risk premium for Sterling has subsequently seen it achieve three week highs against the Euro, slowly closing the window for Euro/ Sterling exchanges.
The Capital’s attraction and market resilience holds its own, with desirable payment terms in the new build sector helping to reduce upfront costs and maintain interest. These staggered payment structures, along with discounts and timely FX plays, have encouraged domestic and international investment into the sector. The current state of the new build sector has encouraged considerable discounts, with multiple purchases approaching the 20% saving mark; Crown Mayfair’s statistics testifying to these levels over the past two quarters. This primarily relates to new developments in regeneration areas such as Earls Court, Canary Wharf and Greenwich, as well as stock in prime locations where declining sales and higher associated costs have left more bargaining power in the hands of the purchaser.
The current market is certainly more price sensitive, whereby 49% of properties across prime central had asking prices reduced in Q1 2016, with transactions on average -9.1% below initial asking and -11.1% for £5m+ properties (source: Knight Frank, Lonres). Market consensus, reinforced by transaction data, highlights the importance of sensitive pricing, as savvy buyers will only commit where good value is found, whilst ambitiously priced stock will struggle to gain traction.
It remains to be seen how the markets will evolve as elections and referendums unfold, nevertheless opportunities are available for those eager and prepared to seize them.
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This post was written by Tim Jones