Best Advice: Proportion of London overseas buyers falls
Fri 20 Nov 2015
Domestic buyers have risen to a new level of prominence in the London property market, according to Marsh &Parsons latest London Property Monitor.
During the third quarter of 2015, 79% of property purchases were made by domestic UK buyers, up from 75% ayear ago. Sales activity from domestic buyers has surged forwards to fill the gap left by overseas buyers and
investors, who have been left more cautious by the strong sterling, stricter government measures on non-domicilestatus, and heftier Stamp Duty for higher value purchases.
As a result of this new hesitation, domestic mortgage buyers and first-time buyers have become more prominentin the London market, with the proportion of mortgage buyers in Prime London soaring from 53% in Q2 to 65% inQ3.
At the same time, overseas and foreign nationality buyers accounted for 21% of all Prime London propertypurchases during Q3 2015, which has fallen quarter-on-quarter, and is also down from 25% of all sales during thethird quarter of 2014. This pattern is also being mirrored in Prime Central London, traditionally favoured byoverseas investors, with the proportion of foreign buyers standing at 32%, down from 34% in Q2 and 37% a yearago. The investor share of the market has also dipped in Prime Central London over the past three months.Investors accounted for 35% of all Prime Central London sales during Q3, a drop from 42% in Q2.
However, with domestic buyers stemming this shortfall, overall demand for Prime London homes has grown inthe three months to September 2015, and the number of registered buyers has climbed 4%.
Combined with a 5% drop in the supply of properties available on the market, and buyer competition is buildingas these trends diverge. There are currently 14 buyers for every available property for sale in London, increasingfrom 12 in Q2, and 10 at the end of 2014.
Peter Rollings, CEO of Marsh & Parsons, said: The London property market has had to grit its teeth and bear thebrunt of some rather trying taxation changes in recent months. At the high-end buyers are at the rock face of thenew steeper stamp duty, and from overseas the strength of sterling, and government encroachments onzom-dom status make investing in the London property market seem daunting. This has cast some shadows overthe capital, but the millions of Londoners who live and work in the city have acclimatised much more quickly tothe property taxation changes, and have risen up to fill the void left by overseas purchasers and investors.
Were noticing longer purchase chains than ever as domestic buyers really start to dominate the market, anddemand is really putting a strain on supply. This should ensure that London houses prices and sales activitycontinue their ascent into 2016.
After a period of stalling prices from October 2014 to March 2015, house price growth in London is back inpositive territory and continued a steady recovery throughout Q3, with average property values climbing 0.3% inthree months.
After experiencing such rapid house price growth in 2014 the market in Outer Prime suburbs is adjusting, and asa result, Prime Central areas of London are now seeing the strongest house price growth across the capital, with average property values boosted by 0.4% in Q3. But taking into account the much faster gains in Outer PrimeLondon over the last two years, the premium a homebuyer can expect to pay to live in Prime Central areas is in
long-term decline. Since Q3 2013, house prices in Outer London have soared 12.6% (equal to 131,000), andthis has narrowed the price gap significantly between homes in prime Central and Outer London.
The price premium of buying property in Prime Central London over Outer Prime neighbourhoods now stands at74%, but this has shrunk from 98% two years previously.
One-bedroom homes are the most sought-after in Prime London, either as a starter home, buy-to-let orpied-a-terre, and have witnessed the largest increases in price in the past quarter. Average prices for aone-bedroom property have risen 3.5% since Q2 2015, or 21,240 in cash terms. The trend is even morepronounced in Prime Central areas, with smaller one-bedroom properties appreciating in value by 5.9% in threemonths.
Larger family-sized properties have experienced slower price growth in Q3, with the typical four-bedroom homeincreasing in value by just 0.5% in the three months to September 2015.
Rollings added: The sudden price surge in Outer Prime areas over the past two years has really come tochallenge what we consider the Prime property heartland of London, and the reality now is that the epicentre ofthe capitals housing market is expanding outwards. Properties in the traditional Prime Central stronghold willultimately always hold their value, but after 24 months of relative price stagnation, it requires much less of a priceleap than it did a few years previously, after such stellar price rises in the Outer areas of the city.
We expect property further out from the centre to make the strongest gains before the end of the year, mirroringthe trend evident across the capital as a whole. Properties at the lower end of spectrum have accumulated thestrongest price momentum, and this is unlikely to dissipate.