Overall the market was notably quieter during due to a combination of the uncertainty surrounding the European Union referendum and a slowdown following a boost in the first quarter ahead of stamp duty changes in April.
The market has also been influenced by higher stamp duty for high value properties, according to the report from real estate firm JLL which adds that potential buyers adopted a wait and see attitude ahead of the referendum vote.
Since the vote to leave the EU, and the subsequent weakening of sterling, several international buyers have been more active although a good deal of uncertainty remains, especially in terms of the medium term outlook, the report says.
However, the fact that the vote is now in the past also seems to have encouraged a few more domestic buyers back into the market.
The number of properties on the market has increased again during the second quarter as vendors fail to sell or elect not to sell at prices unacceptable to them. This additional choice and bargaining power for purchasers is contributing to both the scale of price falls and the slowdown in transactions.
‘Given recent uncertainty it is unsurprising that prices have weakened again. On average prices have fallen by 3.3% in the year to quarter two, but they have also declined in every quarter since the first quarter of 2015 as a variety of influences have impacted on confidence and switched the balance of power in favour of buyers,’ said Neil Chegwidden, residential research director at JLL.
The data also shows that prices slipped by 0.9% in the second quarter of 2016 having fallen by 1.1% in the first quarter and price falls over the past year have been greater for higher value properties although large lateral flats continue to hold their value better than other large apartments or houses.
On average prices have declined by 6% over the 18 months to the second quarter of 2016 with higher value property prices down by an average 10% and prices have fallen across all price ranges during quarter two and over the last year.
The sub £2 million market continues to be the most resilient. However, prices have fallen in each quarter since the first quarter of 2015. On average prices in the sub £2 million bracket have fallen by 2.6% over the 12 months.
Meanwhile, prices in the £2 million to £5 million market have been declining for 18 months now, with prices down 2.9% during the year to the second quarter. Prices in the £5 million to £10 million price bracket and the £10 million plus market have been impacted most notably by the stamp duty changes. Prices have dropped by 4.4% in the year to quarter two in the £5 million to £10 million market and by 7.1% in the £10 million plus market.
The report explains that the uncertainty surrounding the EU referendum together with a quieter trading quarter following the surge in activity ahead of the April stamp duty surcharge on second home purchases were the main reasons behind a sharp drop in transactions during the second quarter. Prior to this, transaction volumes were being detrimentally influenced by the stamp duty reforms over the preceding 18 months including the December 2014 and November 2015 and April 2016 changes.
On an annual basis estimated transaction levels decreased during the second quarter of 2016 compared with the first quarter. In the year to the second quarter the number of sales increased by 13% compared with the year to quarter two in 2015.
Richard Barber, director of residential agency at JLL, based in Knightsbridge, believes that it has been perhaps the most turbulent changes to the prime central London market since 1991 with increases in SDLT, additional levies for second home owners and huge political uncertainty both post and pre Brexit.
‘In spite of these influences the market has shown considerable resilience in terms of capital values although naturally transactional volumes have diminished. Whilst we have seen values dropping by at least 10% in some cases, London’s attraction as the world’s premier destination remains undimmed and sellers are now beginning to adjust their expectations to the more stringent tax regime and are being more realistic in terms of pricing,’ he said.
