David Ruddock, Associate Director and Sales Manger of our Marylebone & Mayfair office, assesses the impact of June’s general election on the prime central London property market.
Have turbulent waters calmed, or choppy seas returned?
When I woke up on the morning of the election results I confess that, as I turned on the news, my heart sank. I anticipated a coalition government would be greeted by the market in a similar way to the Brexit vote. 2016 was a very difficult year for the central London sales market and, having seen a resurgence in confidence towards the end of last year and the beginning of this, I anticipated the result would dampen this recovery. Surprisingly, instead of being greeted by cautious buyers and concerned sellers, we have encountered confidence and a determination to get on with things. On election day itself we received five offers, all of which have been agreed, and we’ve seen a general increase in activity since then. So why is this?
There were two significant influences on the prime central London property market in 2016; stamp duty changes with the introduction of the 3% surcharge, and the outcome of the EU referendum. Stamp duty changes encouraged many investors to finalise transactions before the end of March 2016, bringing sales forward and ensuring that Marsh & Parsons had the most successful single month in its history. Demand naturally softened after this as sales accelerated to beat the deadline. Then, the unpredictability surrounding Brexit caused a further softening of the market which continued after the result in July. A significant number of clients decided to ‘park’ their properties on the lettings market as the climate remained uncertain throughout the rest of the year, we saw supply in the lettings market peaking in August 2016, up 53 per cent on April 2016. This over-supply inevitably led to downward pressure on rental yields.
The market seemed to find a more natural balance towards the end of 2016, when prices stabilised and transaction levels increased. This was caused by a restriction in supply, astute foreign investors utilising preferential exchange rates, and a general realisation that the UK economy and broader demand for housing in London was not going to collapse.
Since Article 50 was triggered in March this year we’ve seen a return in demand from buyers seeking second homes for themselves or family members. That’s come with a reduction in supply, down 13 per cent across the Marsh & Parsons network and 26 per cent in prime central London* (Q1 2017 vs Q1 2016), resulting in increased competition amongst buyers for fewer properties, and more competitive price levels leading to quicker transactions.
This has not changed post-election. It seems that the buyers are taking a long-term view, which is understandable with transaction costs as they are, and have remained confident in the prosperity and health of the market. In short, though we sail in perceived choppy waters, the market has found its sea legs.
If you would like to discuss the market or have an up-to-date appraisal of your property or portfolio, please do not hesitate to contact me.
*Marsh & Parsons defines ‘prime central London’ as to include Chelsea, Earl’s Court, Holland Park, Kensington, Marylebone, Notting Hill, Pimlico and South Kensington.
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