While buyers in London of property valued above £10 million have become more cautious, there are signs the super prime market is moving towards recovery mode.
Higher rates of stamp duty and the uncertain political backdrop in the UK have affected the confidence of buyers in this market, according to Daniel Daggers of the super prime sales team at international real estate firm Knight Frank.
He revealed that they are taking their time and not rushing to make an investment. He has found, for example, that they are comparing more properties before transacting.
‘Unless you have a buyer who needs to move for family or business reasons or alternatively a unique property, the gestation period prior to a transaction is longer,’ he explained.
The average number of viewings for a property before exchange increased to 41 in the first nine months of 2017 from 30 in the same period in 2016, a Knight Frank analysis of London’s £10 million plus market shows.
Furthermore, the median distance travelled by buyers on viewings before an acquisition was three kilometres in the third quarter of 2017, compared to 2.6 kilometres in 2016 and 2.3 kilometres in 2015.
In similar fashion to the wider prime central London market, sales volumes above £10 million have slowed since 2014 in response to a succession of tax changes as well as political uncertainty.
However, despite the mood of caution, there is evidence the super-prime sales market is moving towards recovery mode.
While transaction volumes remain down on 2013 and 2014, sales in the first nine months of 2017 increased 3.4% compared with 2016 and Daggers believes demand will strengthen further due to the relative weakness of sterling and the cyclical nature of the London market.
‘People have to move, families are growing, life moves on and in many instances our clients have waited for two years for the market to bottom out, something that may now be on the horizon,’ he pointed out.
Average prices for properties worth more than £10 million declined by 2.8% in the year to October, but Knight Frank says this was an improvement on a decrease of 7% recorded in February this year. It was also stronger than the 4.8% decline registered in October for homes priced at between £1 million and £2 million.
‘I sense a change coming. You can tell by the level of engagement we are now seeing from buyers. Prices have risen more strongly outside zone 1, which means there will inevitably come a time when the central areas start to look good value again,’ Daggers concluded.
