James Bailey, Chief Executive of Henry & James reviews autumn market movements and considers the potential impact of the November Budget.
Confidence is everything in the property market and, as autumn draws to a close, we are pleased to report that confidence levels are far higher than looked likely at the start of the year.
At Henry & James, we have been much busier than we anticipated, while prime central London continues to buck the general trend, far outstripping the predictions in the wake of Brexit and the 2016 hikes in stamp duty.
The latest LonRes survey perfectly illustrates the more bullish mood among the capital’s property professionals. A year ago, 46 per cent of the agents surveyed were expecting prices to fall by more than 5 per cent over the next twelve months. Today only 14 per cent of agents feel similarly pessimistic.
It is the same with transaction levels. Two-thirds of those surveyed last autumn expected that, in the third quarter of 2017, transactions would be down on the equivalent period in 2016. In fact, the reverse has happened, with transactions in prime central London up by 6 per cent in the last twelve months.
It is also important to note that, while more properties are changing hands this autumn than many experts expected, they are not being bought at knock-down prices. We explain to clients that, if are they are serious about wanting to sell, realistic pricing is the key. Many have heeded the message and dropped their asking price. However, what is encouraging this autumn is that the gap between the expectations of vendors and buyers seems to be narrowing.
A year ago, the average discount on the initial asking price in prime central London was 9.1 per cent. It is now 8.5 per cent – a small drop, but symptomatic of a market slowly getting back into kilter. Compared with a year ago, when nearly half the properties sold in the area were sold at a discount, 57 per cent of properties sold this quarter have fetched their asking price.
High levels of stamp duty on the most expensive properties, as well as on second homes, continue to shape the market. Respondents to the LonRes survey report a decrease in the number of investors, as opposed to owner-occupiers, buying property in prime central London. Not surprisingly, the number of properties coming on the market to let fell by 4 per cent in the third quarter of 2017. But rental values remain pretty stable. In prime central London, they have fallen by just 1.8 per cent in the past twelve months. And, in a clear sign that the tide is turning, most of the agents surveyed by LonRes expect the number of new lets to rise in the next twelve months.
We are not expecting any dramatic measures in the Budget on November 22 to stimulate the prime central London property market. Yet, as we are seeing at first hand on a daily basis, the market is on the up and, not for the first time, showing its flexibility and resilience.
- James Bailey is the Chief Executive of Henry & James, Belgravia and Chelsea’s premier estate agent for residential sales and lettings: www.henryandjames.co.uk