Within this sector the market below £2 million has remained strong in the last year, mostly due to the stamp duty threshold and ongoing threat of a mansion tax, according to the latest report from agency W.A. Ellis.
Overall it has seen transaction levels increase by 49% year on year in the SW3, SW7, SW10 and W 8 postcodes as well as owners downsizing from the £5 million to £7 million price range.
The report also shows that the lettings market remains seasonal, with supply currently outweighing demand and lettings enquiry levels are anticipated to rise with the arrival of expats in the summer.
‘We have received an impressive number of offers in recent weeks for both houses and flats, some of which we are openly marketing but there is movement behind the scenes with a lot of off market stock,’ said partner Richard Barber.
‘We are increasingly seeing a number of people downsizing from properties in the £5 million to £7 million price range, and the market below £2 million remains as strong. We were recently marketing a property priced just above £2 million that received three bids all below the stamp duty threshold, reflecting buyers’ aversion to the cost of the tax above £2 million,’ he explained.
But he pointed out that there are reservations surrounding the 2015 election, with many worried about a Labour or Labour/Liberal Democrat coalition government introducing a mansion tax or similar wealth tax which could potentially affect the market.
‘Bringing in measures to reduce the number of foreign buyers purchasing in London is hard to argue if you’re a domestic buyer attempting to climb the property ladder, however, the next elected government should not turn a blind eye to the huge income that this foreign investment creates for the overall economy,’ he added.
According to Lucy Morton, senior partner and head of lettings at W.A. Ellis, so far this year, enquiry levels from prospective tenants are substantially higher than at the tail end of 2013. ‘However, 6% more property has been launched onto the market than during the same time last year, exacerbating supply levels. Supply is now outweighing demand in prime central London,’ she said.
‘That said, I believe that this imbalance will be rectified in the spring because the market has become so much more seasonal. With an improved economic outlook, expat tenants coming to work in the City are expected to form an increased proportion of demand during 2014,’ she explained.
‘As such, we are anticipating that enquiry levels from April to October will continue to rise. Not only that, but the private rental sector continues to grow apace across London, and I believe this is partly due to first time buyers failing to raise the deposit to buy and get on to the property ladder,’ she added.
She also pointed out that presentation remains extremely important in order to achieve a successful let. ‘A prime example is an unfurnished flat we put on the market at the end of 2013 which didn’t receive much interest. We advised the landlord from the outset to rent furniture and market the flat on a furnished or unfurnished basis. In the absence of a tenant, the flat was then furnished and dressed, and an asking price offer was agreed within one week with two back up offers, reinforcing the message that presentation is key,’ said Morton.
In the family house market, the firm is still experiencing a shortage of supply. ‘However, with the lower number of transactions of family houses in the sales market, we could potentially see sellers becoming reluctant landlords again and putting their houses on the lettings market,’ Morton added.
