The new rates of stamp duty introduced by the Chancellor in his Autumn Statement in December 2014 brought mixed blessings for different parts of the market, the analysis report from real estate firm Savills shows.
‘For all buyers below £937,500, stamp duty rates have fallen and this is reflected in levels of annual price growth. Above this margin, the increased rates of stamp duty resulted in an adjustment in values at the top end of the market in the final quarter, most notably in the higher value extended commuter belt of London,’ said Lucian Cook, director residential research Savills.
He also pointed out that given a strong performance earlier in the year, these commuter markets showed the highest level of annual growth. Prices rose by 4.6% in the London suburban markets such as Esher, Rickmansworth and Loughton and by 3.7% in the inner commuter zone in the likes of Sevenoaks, Guildford and Beaconsfield.
While the markets within the commuter zone, up to an hour from London, are all now at or above their 2007 peak, the regions beyond these areas are some way below this level. Prices remain on average 10% below their 2007 peak across the remainder of the South of England and over 20% below across Scotland as an average. The markets of the Midlands and the North falls between the two with a decline of 14.8%.
In the sub £1 million prime market that predominantly benefits from a cut in stamp duty, average prices rose by 4.6% in 2014, fuelled by particularly strong growth in the first six months of the year.
‘These lower value prime markets, particularly those well connected to London, are forecast to see the strongest growth over the next year and into the midterm,’ explained Cook.
Higher value homes in the £2 million plus range recorded marginal 0.8% falls over 2014, but values fell by 3.1% in the last three months of the year.
The report also says that the other overriding feature of the regional market remains the stronger performance of properties in urban locations. Annual growth in prime cities across the UK, such as Oxford, Cambridge, Bath, York, Chester and Edinburgh, averaged 5.8% price growth over 2014 compared to an average increase of 3.1% in their surrounding villages and 0.9% in rural locations.
Meanwhile, prime London house prices rose by an average of 2.6% in 2014. However, 2014 was a year of two halves with prices rising by 4.9% in the first half and falling by a net figure of 2.2% in the second half. Savills said this was predominantly due to the stamp duty changes introduced in the Autumn Statement which particularly impacted the higher value markets.
The strongest performers in 2014 were the markets up to £1 million and in the £1 million to £2 million range. These saw annual price growth of 7.9% and 3.3%, reflecting the fact they are less adversely affected by the stamp duty changes and would be outside of the scope of opposition proposals for a mansion tax.
‘The greatest impact of the stamp duty increase was seen in the most valuable markets of prime central London, which have seen the strongest price growth in recent years,’ said Cook. Indeed, in these central markets, where prices average £4 million, values fell by 4.2% in the last quarter, contributing to small falls of 1.3% year on year.
Though the £5 million plus market saw slightly bigger price falls of 2.7% in 2014, there were still well over 500 sales in this part of the market over the course of the year. These had an aggregate value of over £5.5 billion, being within 3% of the previous year. Of these, over 250 took place in the second half of the year.
‘It will take time for the effect of the Autumn Statement stamp duty changes to become clear, but early signs are that the additional cost is predominantly being borne by sellers through price adjustments similar to the amount of extra stamp duty,’ Cook explained.
‘There is evidence some of the froth had come off of the market before the Autumn Statement. Our analysis suggests that even without the stamp duty changes, values were on track to soften by around 1% in the final quarter of 2014, in part due to pre-election uncertainty around high value property taxation. The stamp duty changes took that adjustment to -2.6% on average,’ he pointed out.
‘This being the case, early indications are that where stock is priced to reflect these circumstances, the market continues to function with a healthy level of transactions,’ he added.
