Central London property market fragmented in 2Q2015, says fund

KUALA LUMPUR (Aug 19): Prime Central London’s property market in 2Q has been fragmented owing to increased taxes targeting the upper end of the market, according to Land Registry data for the second quarter 2015 (2Q2015) and analysed by fund London Central Portfolio (LCP).

These include an increase in stamp duty for properties above £1.125 million (RM7.23 million) and the annual tax for enveloped dwellings that has been extended to properties over £1 million, said the fund in a report entitled “LCP Quarterly Update: August 2015”.

“This has resulted in a painful quarter for the ‘Houses’ sector, with prices falling 12% this quarter, although annual growth is still positive at 6.6% over the year,” said the report.

However, the cheaper mainstream ‘Flats and Maisonettes’ sector enjoyed higher average growth of 1.73% and 11.9% quarter-on-quarter and year-on-year respectively, said the report.

In addition, buying activities have also remained more resilient, with a 6.4% increase in flat sales over the last quarter, despite the tumultuous pre-election months, said the report.

However, the report noted that prices for ‘Flats and Maisonettes’ of £1.25 million have surpassed the £1.125 million stamp duty land tax threshold.

According to LCP’s research, 59% of property transactions in prime central London are below £1 million.

“This has helped underpin the sector’s robust performance. As the heartland of the ‘buy to let’ sector in prime central London, this is encouraging news for landlords,” said the report.

However, the overall property market in greater London has seen slower growth levels as the market reached its ceiling of affordability due to delayed credit crunch recovery, according to the report.

“Growth has reduced to 6.6% over the year, with prices rising 2.2% during the quarter, to reach an average of £537,308. Volumes, however, fell by 9% over last year with just over 106,000 sales taking place.

“England and Wales showed subdued but positive growth, with prices rising just 1.4% over 1Q2015. Transactions held steady over the year at 844,030 sales.

“Whilst still down from over one million recorded sales p.a. pre-credit crunch, there was a substantial 18.4% increase in transactions quarter-on-quarter, suggesting that the market is finally making a long overdue recovery,” said the report.

With London excluded, average prices in England and Wales still only stand at £227,871, on par with where they were in the third quarter of 2007, it said.