Property prices in England and Wales increased by just 0.8% in the year to June 2018 and sales fell by 3.2% to their lowest level since stamp duty was changed in December 2014, according to the latest housing market analysis.
Average prices in June, excluding new build, reached £287,558 while the price of a new home is now close to a record high of £343,244, representing a 20.1% premium over existing stock.
The LCPAca index also shows that in Greater London prices increased by 0.5% year on year. Values of existing homes reached £628,807 and sales fell 8%to a level just above what was seen during the global financial crisis.
The fall in sales have been seen across Greater London with new build transactions falling 12.6% over the year while new build prices reach a record high of £755,553, representing a 26.4% premium over existing stock.
In the prime central London market existing average prices in June reached £1,754,317, some 8.2% lower than in June 2017 and a 6.9% drop from the previous quarter. Annual sales fell 8.5% to levels last seen during the economic downturn.
The fall in sales has been recorded across the prime central London market with new build transactions falling 17.3% across the year. New build prices, however, reached a record high of £3,209,089, a premium of almost 90% over existing stock.
The significant re-adjustment in prices in London is the culmination of the introduction of graduated stamp duty which increased the top rate of the property tax from 5% to 12% and political uncertainty caused by two general elections and the decision to leave the European Union according to Naomi Heaton, chief executive officer of LCP.
‘Whilst there was an increase in the proportion of higher value transactions in the first part of 2018, this surge appears to have dissipated. This has been reflected in the average price falling by 11.1% from a high of £1,973,140 in February,’ she pointed out.
‘There has been a rally in average prices in Greater London over the last quarter, with a record high of £628,807 achieved in June, annual prices have seen growth of just 0.5% and while these statistics do not reflect the discount from original asking price to sale price, a disconnect between seller and buyer expectations can be observed,’ she explained.
‘This is undoubtedly a contributing factor to the sluggish level of transactions. Current annual sales have fallen 8%. With current residential tax policies and the lack of a defined plan post-Brexit contributing to economic uncertainty, it appears that only those who have to move are doing so. Falling prices will only exacerbate this as sellers are not motivated to move if they see the value of their home decline,’ she added.
She also pointed out that subdued activity is now starting to have a very tangible effect on the UK, both amongst house builders and estate agents. ‘Currently, with the uncertainty created around Brexit, there does not appear to be anything significant on the horizon which will help buck this trend. Whilst increasing affordability through falling prices may benefit first time buyers and second steppers, it tends to have the counter effect of suppressing sales activity,’ she said.
‘The Government is unlikely, and probably unable to, reverse the recent tax changes, given the political consequences. Therefore, it looks as though it will adopt a wait and see attitude for the time being, although the economic consequences of falling transactions and a reduced tax take are beginning hit home,’ she concluded.
