Sales in London’s existing homes market are increasingly driven by owner occupiers rather than landlords, according to a new analysis.
Transaction volumes have stabilised and prices have re-based following a series of tax changes that cooled demand in the prime London market, says the analysis from real estate firm Knight Frank.
James Clarke, a regional head for Knight Frank in the capital, pointed out that as buyers see greater evidence of value, those driven by needs such as schooling or downsizing have responded more quickly.
Meanwhile, landlords are still processing a series of recent tax changes that have put downwards pressure on rental supply and upwards pressure on rental values.
Landlords accounted for 14% of all prospective buyers in May 2018, the analysis of Knight Frank data shows. This was lower than the figure of 21% recorded in May 2014. The data, which is based on a rolling average, does not include the new-build market.
‘It is the needs based buyers who are driving the market at the moment. People are now thinking longer-term before moving than they did previously because of higher stamp duty. From a landlord’s perspective, the tougher tax landscape means some are sitting on their hands before deciding what to do next,’ said Clarke.
A growing number of landlords are exploring a sale after tax changes affecting issues like mortgage interest relief and wear and tear allowance. A 3% stamp duty surcharge that was introduced in April 2016 has also cooled demand, the analysis also pointed out.
The number of properties listed for let in prime central London has fallen as a result. The figure was 15% lower in the year to May 2018 than the previous 12 month period, Rightmove data shows.
Indeed UK Finance data shows there were 5,000 buy to let mortgages issued in April 2018, which compared to 8,600 in April 2015.
As a result of declining levels of supply, Knight Frank expects positive rental value growth to return in prime central London 2018.
