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Savills World Research UK Residential savills.com/research Spotlight | 2017 Prime London & Country MindHow to match the the expectations gap of buyers and sellers Inside The high premium for coastal living Ranking the world’s tech cities The prospects for a stamp duty cut FOREWORD Great (adjusted) expectations It’s a rare moment when we can say that the in the prime housing markets of our regional cities and prime housing markets beyond the capital rural locations means the gap in buyers’ and sellers’ have performed better than London. But that has expectations is smaller and the market is more fluid. been the case since the middle of 2014. Elsewhere in this issue, we look at property hotspots, The introduction of higher rates of stamp duty and identifying the high premiums that coastal (p19) and a 3% surcharge for additional homes have shaped the historic properties (p26) attract. We reveal London's prime market. Increased exposure to capital gains tax position in Savills Tech Cities ranking (p10), and for international buyers cooled the prime central review the super-prime property market across central London market, while Brexit uncertainty compounded London, the Home Counties and private country this effect across the prime London market as a whole. The surprise UK election announcement will add to the uncertainty in the short term, but is unlikely to change the shape of our forecasts. The gap between buyers’ In the state of the market (p4), Katy Warrick looks at the situation for buyers and sellers in London, and and sellers’ expectations at what the future holds. Kirsty Bennison takes up the story beyond London. Although not immune to tax is wider, contributing to pressures, the prime suburban markets have been less exposed, resulting in modest price growth and some a pool of overpriced stock interesting emerging trends. Clearly, sellers have had to adjust their expectations. estates (p22). I weigh up the evidence and prospects In prime central London, there is evidence that the for a future cut in higher-rate stamp duty (p16). market understands this. In the rest of prime London, Looking ahead, the market will remain price the market seems further from acceptance, meaning the sensitive during the next 18 to 24 months. Over time, gap between buyers’ and sellers’ expectations is wider. political uncertainty will pass and the market will That is contributing to a greater pool of overpriced adjust to whatever tax environment it faces. That stock. Even if values do not fall much further in this should set the platform for greater optimism market, sellers’ expectations of them will have to. and a return of more consistent price growth. The resulting lack of liquidity in this market has had an impact on the flow of housing wealth leaving the capital for prime housing in the commuter zone. Lucian Cook UK Residential Lower price growth over the past dozen or more years 020 7016 3837 [email protected] All properties shown in this 4-9 14-15 20-21 publication are listed for sale STATE OF THE MARKET FORECAST PRIME RENTALS with Savills. For more information, How prime housing outside Stamp duty. Brexit. Uncertainty Prime lettings are feeling the please call 020 3797 6817. London is outperforming the has cooled the prime market, but impact of growing stock levels capital. We look at new trends a longer-term recovery lies ahead and weaker corporate demand Prime London 10-11 16-18 22-25 and Country 2017 TECH CITIES STAMP DUTY SUPER PRIME The views expressed in this publication are not necessarily those of Savills or the publishers. The London is a big draw for the tech What are the chances of a cut in Assessing the super-prime market information contained in this publication is correct at time of going to press. All rights reserved. No material sector, but will the capital’s high higher level stamp duty to bring in central London, the Home may be used in whole or in part without the permission costs undermine its future status fresh life to the market? Counties and country estates of Savills. While every care is taken in compiling content, Savills does not assume responsibility for effects arising from this publication. 12-13 19 26 BUYER PROFILES COASTAL PROPERTIES LISTED LIVING We profile five influential Looking to buy a property on the Historic houses are highly types of buyer whose decisions coast? Prepare to pay a sizeable sought-after properties – and will shape the future market premium for the privilege have a premium to match savills.co.uk/research 3 STATE OF THE MARKET Prime under pressure The prime housing markets outside London may have only experienced modest growth since mid-2014, but they have outperformed the capital. Katy Warrick examines the future of the prime London market, while Kirsty Bennison looks at trends in the prime markets beyond the capital Brexit uncertainty has compounded the cooling effect of stamp duty across the London market 4 savills.co.uk/research STATE OF THE MARKET The prime market: a definition This market consists of the most desirable and aspirational property by location, aesthetics, standards of accommodation and value. Typically, it comprises properties in the top 5% of the market by house price Prime country markets have been less exposed to some of the factors that caused London to falter savills.co.uk/research 5 STATE OF THE MARKET WORDS KATY WARRICK Prime London remains sensitive to change By the end of March 2017, prices in the prime London have begun to push against the limits of the loan-to- market had fallen by an average of 6.1% from their income ratios lenders are prepared to offer. Here, it 2014 peak. For the prime central London market, the was not until the Brexit vote that prices started to price adjustment has been a fall of 13.2%. Much of the show some give, falling 4% in the second half of 2016. blame has been laid at the door of stamp duty. This indicates Brexit uncertainty has compounded However, this is just one element of the story. the cooling effect of stamp duty in the prime London market. To date, this has been down to sentiment, Not just about stamp duty driven by uncertainty over the future, rather than any In the immediate aftermath of the December 2014 identifiable weakening in the London economy. stamp duty changes, prices fell by 4.4% in the prime But the impact has been real and sellers understand central London market. They fell by a further 3.6% they have to adjust expectations – asking over the following the announcement of the extra stamp duty odds for your property is a passion-killer for buyers. levy on purchases of investment property and second homes in December 2015. The scale of these falls Is London bottoming out? reflect that the central London market has also been TwentyCi tracks market activity and its data shows affected by international buyers’ increased exposure that, relative to the number of sales, since April 2016 to capital gains tax and inheritance tax. there have been 70% more cuts in asking prices of Together, these tax changes have served to make prime property in London than in the country. But these buyers more reluctant to exploit the weakness there is evidence these cuts are coaxing buyers back. of sterling. It also left the market more exposed to Of course, the market remains price sensitive. In the uncertainty following the vote to leave the EU, which first quarter of the year, prices in central London fell triggered a further 4.8% fall in central London prices by a further 0.8%. Across the other London markets, during the six months to the end of December 2016. they showed no movement. That suggests the market The other more domestic prime London markets, is finding its level. However, as the impact of serving despite being rich in equity, have also been constrained Article 50 becomes clearer, it will be sensitive to the by mortgage regulation. Buyers who need to borrow ebbs and flows of sentiment in uncertain times. Price movements in prime London The prime market in the capital has remained sensitive in the wake of stamp duty changes and Brexit. Realistic pricing is key 8.0% 1 Key: Prime central London Other prime London 6.0% 4.0% 2.0% 3 4 0.0% Quarterly growth -2.0% 2 -4.0% Mar 2011Jun 2011Sep 2011Dec 2011Mar 2012Jun 2012Sep 2012Dec 2012Mar 2013Jun 2013Sep 2013Dec 2013Mar 2014Jun 2014Sep 2014Dec 2014Mar 2015Jun 2015Sep 2015Dec 2015Mar 2016Jun 2016Sep 2016Dec 2016Mar 2017 1 Though slowed by successive stamp duty increases, prices in central London rise by 26% between March 2011 and September 2014 2 Prices in prime central London fall by 4.4% in the immediate aftermath of the December 2014 stamp duty reforms 3 Values in central London fall by a further 3.6% following the announcement of the 3% stamp duty surcharge on additional homes 4 In the six months after the EU referendum, prices adjust by 4.8% in central London and by 4% elsewhere Source Savills Research 6 savills.co.uk/research STATE OF THE MARKET Market moves In the period following the 2014 stamp duty changes, prices in the prime London market have gone through large adjustments, particularly in the highest price sector £10m+ -15.5 £5m-£10m -12.8 £3m-£5m -10.1 £2m-£3m -8.7 £1m-£2m -5.2 £500k-£1m 0.0 -18% -16% -14% -12% -10% -8% -6% -4% -2% 0% Growth since 2014 peak Source Savills Research savills.co.uk/research 7 STATE OF THE MARKET WORDS KIRSTY BENNISON Stop-start in the town and country markets Beyond London, the prime market has seen some However, this broad average disguises some trends marked changes compared to those in the capital.