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Market Conditions

By Andrew Ellinas LL.B.Friday, 9 June 2017

A year on from the most recent round of stamp duty changes, the impact is being felt by both the sales and lettings market. For sales, buy-to-let investment has dwindled, with owner-occupiers supporting a market which, all considered, is holding up better than many had expected and there are early indications that values are starting to bottom out.

For lettings, the market is still hampered by excess stock, stemming from increases in new development completions, a glut of pre-SDLT change purchases and a rise in reluctant landlords.

Whilst the changes in stamp duty have certainly been a major factor, the Central London markets have also been affected by international buyers’ increased exposure to capital gains tax and inheritance tax. This combined with the uncertainty surrounding the UK’s vote to leave the EU has resulted in a cautious approach, leading to a reluctance to take advantage of the weaker value of sterling.

So far this year the gap between initial asking prices and prices achieved has narrowed. However, discounts are still higher than pre-2016 and suggest that there is still something of a correction to come in existing asking prices in order to bring them closer in line with buyer expectations.

This narrowing of the gap suggests two things. Firstly, that properties are still reaching the market with overly optimistic asking prices. But, secondly, that vendors are becoming more accustomed to market reality and are now willing to accept lower offers than they may have done in the past.

London’s position as a global financial centre is fundamental to the UK’s financial growth and, whilst it is probably inevitable that some jobs will be lost in the City, the capital will undoubtedly continue to seen as a safe haven for national and international buyers.

With the rate of price falls across the prime London residential markets slowing notably in the first three months of this year and with interest rates still at a record low we expect buyer confidence to return. Property values will grow as the uncertainty clears and buyers realise that they cannot put major financial decisions, and their lives, on hold forever.

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