With recent changes to the stamp duty and mortgage rules in Britain, the London property market is feeling the effect with a plummet in housing transactions. Transaction volumes, referring to the number of houses being bought and sold in the capital, show an 18 per cent drop since last year, according to figures released by the housebuilder Berkley.
The market outlook going into 2018 remains tough, with further falls expected due to increasing uncertainty.
Low figures
Land Registry figures show house prices at an all-time low in three London boroughs. February 2017 saw only 55 transactions in the whole of West Minister, the lowest number ever recorded by the Land Registry. This figure was 60 per cent lower than February 2009, immediately following the last market crash.
Wandsworth showed a 72 per cent year on year decrease, posting 105 sales transactions in February 2017 compared to 2016’s 370.
Similarly, Redbridge showed only 82 sales in this time period, compared to 260 in 2016. This showed a 68 per cent year on year decrease.
Recent hikes
In its end of year report, Berkley singled out stamp duty hikes, uncertainty surrounding Brexit and its impact and tax changes as key factors in the slowdown of transactions. Notably, the number of potential landlords in the capital has fallen due to a tax change that means landlords can no longer deduct mortgage interest costs when they calculate taxable profits from 2020.
The company’s Chief Executive Rob Perrins states: “There remains good underlying demand for property in London and the South East, but the combination of uncertain UK economic and political outlook and high property taxation continues to mean customers are more circumspect and inevitably purchasing later in the development cycle.
“Brexit uncertainty and concerns over growth and inflation, coupled with the changes to SDLT (stamp duty land tax) and mortgage interest deductibility, continue to impact the market.”
Future concern
Wider concerns about the region’s property market are driven by bloated prices in the capital, slow progress in Brexit negotiations and worries about further interest rate hikes from the Bank of England driving up mortgage costs. These apprehensions are starting to have an influence on the market. Decades of runaway price growth is seeing the market overrun with high-end investors. The affordability of London is leading to fears about the future sustainability of this growth and the possibility of local residents becoming priced out of the city.
It is predicted that the uncontrolled growth will burst this year and buck national trends. While the rest of the UK is expected to post growth in 2018, London prices are likely to drop by 2 per cent next year.
About Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.