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London properties under £2 million done better than prime sector, analysis shows
Properties in London under £2 million outperformed the rest of the prime London property market in the second half of 2015, continuing a trend of recent years, the latest analysis shows. In particular, properties worth less than £1 million have grown by more than any other price bracket, according to the latest London residential review from real estate firm Knight Frank. The analysis says that this is because it is a market that is less exposed to regulatory change. The series of tax changes in recent years that affect the prime London market adds £30,000 to the current stamp duty rate for a second home buyer of a £1 million property, though this sum would be matched by house price inflation in less than a year at current growth rates. It is also a market that is less exposed to global economic volatility and more closely aligned with the performance of the mainstream market, where demand continues to outstrip supply on the back of a London population forecast to grow by more than 100,000 every year for the next decade. Indeed, the highest growth has largely been outside the higher price brackets of prime areas of central London over the last 20 years. The analysis report explains that changes to stamp duty rates in December 2014 raised questions around the viability of a system that has dampened transaction levels and lowered the tax take in London. The new rules mean that buyers will pay £153,750 in stamp duty for a property worth £2 million versus to £100,000 before the change. The result is that £1 million plus transactions in London in the first seven months of this year fell 25% compared to the same period in 2014. A Knight Frank analysis of sales volumes across London local authorities shows the biggest impact has been felt in prime central London. Between January and July this year, the volume of transactions fell 28.6% in the borough of Westminster compared to 2014. The drop was 27.5% in Kensington and Chelsea and 27.9% in Tower Hamlets, which includes the Canary Wharf district. Accordingly, the total value of transactions in central London has fallen disproportionately. The report also explains that while a progressively structured tax means more first time buyers and home movers will pay less when they buy a home and there is every indication policymakers are now turning their attention to supply, making sure there are enough new homes to meet demand across London and the rest of the country, the volume of sales only rose in three out of London’s 32 boroughs between January and July 2105 and the value of transactions only rose in 11 boroughs. As a result, the stamp duty tax take was down 8.7% across London, which included a decrease of 17.5% in Westminster, -33.8% in Tower Hamlets and -19.1% in Wandsworth. The stamp duty take only fell 1% in Kensington and Chelsea due to the impact of the higher… Continue reading
UK home owner lending down month on month which CML says is usual winter dip
Home owner house purchase lending totalled £10.7 billion in November, down 9% on October but up 18% on November 2014. The latest data from the Council of Mortgage Lenders also shows that first time buyers borrowed £4.2 billion, down 9% on October but up 14% on November last year. Home movers took out 32,300 loans, down 10% month on month and up 9% compared to November 2014. In total, this was £6.5 billion borrowed, down 10% on October but up 20% year on year. Home-owner remortgage activity was down 9% by volume and 14% by value compared to October. Compared to November 2014, remortgage lending was up 24% by volume and up 36% by value. Gross buy to let lending fell month on month, down 6% by volume and 8% by value, but the substantial growth year on year continued. ‘As expected, mortgage lending activity eased back as the normal dip in the winter months began,’ said Paul Smee, director general of the CML. ‘There was still growth across all lending types in November compared to the year earlier suggesting continued improvement. Our forecasts anticipate that gross lending will continue a slow but steady upward trajectory over the next two years,’ he added. A breakdown of the figures shows that house purchase lending in the UK in November saw a decrease month on month by volume and by value of mortgages advanced, but compared to November 2014 volumes and amount borrowed overall increased. As previously reported, UK gross lending overall in November totalled £20.5 billion, down 6% on October but up year on year by 27% compared to November 2014. This was the highest lending level in the month of November since 2007. First time buyer lending declined by volume and by value compared to October, but saw a year on year increase in loan numbers and amount borrowed. Competitive mortgage rates mean first time buyers continue to pay low levels of their monthly household income to service the capital and interest rate payments of their mortgage at 18.3% in November, joint lowest average percentage level since we began tracking this in 2005 alongside June and September 2015. Home movers borrowed £6.5 billion in November, this was down compared to October but was the highest November level since 2007. Home movers spent 18.2% of their monthly gross household income to pay capital and interest repayments, unchanged on October but a decrease compared to November 2014. Remortgage activity saw a decrease by volume and by value in November compared to October, but increased year on year to have the highest volume of remortgage loans in the month of November since 2011 and the most borrowed in the month of November since 2008. Gross buy to let lending decreased in November compared to October but was substantially up on last year. Buy to let remortgage continues to be the driver of… Continue reading
Fewer Chinese and Russians buyers likely for prime central London market in 2016
There is likely to be fewer Chinese and Russian buyers in the prime central London property market in 2016 but a rise in interest from the Middle East, particularly Iran, is forecast. Overall there is unlikely to be much growth in this market which has been hit by increased property tax charges with more set for second home and buy to let buyers in April. ‘We are cautiously optimistic about 2016, however the market is unsettled and liquidity is down. We don’t expect much growth in the central London market as a whole, except for the very best stock which we believe will keep increasing in value,’ said Rory Penn of property agents VanHan. ‘Prices at the top end of the market may adjust to compensate for increased tax costs. We expect there to be fewer Russian and Chinese buyers in the market than in previous years; the strength of the pound means that London is not currently considered to be such good value for money,’ he explained. ‘It is expected that sanctions against Iran will be lifted next year, and we are already seeing interest from wealthy Iranians looking to buy property in central London but we expect to see a drop in demand for some new build developments, such as Battersea Power Station, as the market is becoming over saturated,’ he added. One area where the firm does expect to see continued demand is Mayfair. ‘There is a lot of development going on and a high level of interest from foreign buyers who are still attracted to the social aspect,’ said Penn. Sales were better than expected for the firm in 2015 with seven residential sales in the £10 million to £50 million with an average transaction size of £16 million which included a £50 million house in central London, one of the largest residential transactions in the area. But it also points out that it remains to be seen what effect property tax will have in the coming months. ‘The slowdown in the prime residential markets last summer had less to do with the election and more to do with the changes in taxes relating to buying and holding residential real estate, although this has had less impact at the very top end of the market,’ said Penn. ‘As the luxury market has become more saturated, discerning buyers are increasingly looking for a boutique, bespoke service. Sellers are increasingly looking to sell properties off-market,’ he added. Continue reading
