March saw the first increase in 2016 in transaction volumes compared with last year. Solicitors across London were inundated with transactions requiring exchange and completion by the 31st March to avoid George Osborne’s 3% stamp duty hike. We believe this to be one of the key reasons sales volumes increased this year compared with a flat market in January and down in February. In addition to this some parts of prime central London saw double-digit declines in asking prices. Price growth in prime central London year to March 2016 is as follows (source: KF PCL Index):
Uncertainty over the outcome over Britain’s EU referendum is having a chilling effect on business activity, with companies pulling back on hiring and investment across sectors from real estate to recruitment. The slowdown is hitting property prices at the high end of the London property market. We expect the property market to continue to slowdown as we approach the referendum in June as it did with the General Election in 2015. There is a fairly even divide between those who believe a Brexit could have a negative impact on cross-border investment, decreasing European investment into our markets, and those who believe the UK will continue as one of the most secure parts of the world to invest their money into property. A KPMG survey conclude that 66% of property industry people thought Brexit would have a negative effect on foreign investment into the London property market. However it is unclear how much (or little) London has benefitted from the EU’s role in attracting buyers from other EU countries as this figure is only 16.5%.
In short, we believe we are currently experiencing a slightly negative impact from the Referendum, however longer term, London will remain one of the world’s leading cities to invest in property.
Weak sterling cancels out stamp duty for US dollar investors
Property investors buying property in London with US dollars are enjoying a discount worth almost a fifth as sterling weakens and property prices dip from a Brexit in the upcoming EU Referendum. On top of this, the US Federal Reserve put up interest rates at the end of 2015 and there is a possibility of doing so again soon, increasing the dollar’s value. These two key points have opened a window of opportunity for international buyers and effectively cancel out the additional stamp duty on second homes. Polling for the referendum on June 23rd has been tight, however there are still a large number of undecided voters leaving uncertainty pushing down sterling. A number of investment banks have predicted that sterling could lose as much as 20% in value should Britain leave the EU.
We believe the central London property market will on the whole remain unchanged for the rest of 2016, presenting an excellent time to buy property. There have been some substantial transactions across prime central London, notably an Italianate villa on Holland Park at £55m. Much of our work at present is sorting the wheat from the chaff to ensure our clients get access to the best properties at the best prices. There are deals to be sought out where vendors are motivated and buyers are long-term. If you would like to discuss your London property requirements or your client’s, then please contact Nicholas Jaffray at: firstname.lastname@example.org and find full details via our website: www.jaffray-estates.co.uk.