For the last few years, the upper tiers of the London market have seen a significant correction with most agents reporting at least 20% falls in prices in real terms. Of course where “best in class” is concerned, some anomalies have still been thrown up, but generally this sector of the market has probably corrected further than at any time in history. In part, this could have been predicted as the inflation from 2008 -2015 where prices all but doubled was unwarranted given the economic climate and the proverbial bubble was reaching capacity.
Whilst George Osbourne had introduced multiple taxes on property up to December 2014, the increase in stamp duty proved a catalyst for the correction. As with many market defining moments we didn’t realise the full impact until a few months later when it started to become clear the buyers had gone. As the graph for Greater London house sales shows, these falls have not yet stopped.
At the upper tiers of the London market we are probably now seeing better value for money than at any time for almost 20 years and, whilst activity has improved this year, we are still in a buyers’ market. Boris Johnson, who seems our PM elect, has promised to overhaul the stamp duty system. If these much needed changes are introduced this could kick start London’s residential property market, even with Brexit unresolved.
In general, people were unsympathetic to the higher stamp duty on multi-million pound property purchases, but what has to be realised is that without volumes at the upper tiers of the market, this will start to affect all levels of residential property and multiple businesses.
When one person buys a large mansion in London, the seller may downsize, and the buyer of the mansion will employ multiple trades in refurbishing the property for several years, all of which goes to create more market activity and more employment in the trades. In the static, falling market we have had for over 4 years, this economic activity is gone, far fewer trades are employed, it is difficult to borrow for re-investment and businesses start to fail.
Whilst Brexit will still have its effects, this change in stamp duty will have a major positive role in helping all tiers of the market and the many areas of the economy connected to our residential property market.