This year has been an interesting one for the Central London property market. Political and economic instability across the world has dominated the headlines, driving people to seek out ‘safe’ investments for their wealth. Prime Central London property and gold have both been extremely popular. The main difference between the two is that gold is very vulnerable to a loss of confidence and produces no income whereas property is not only a capital asset, a home one can live in, but also it can produce an income if let out.
Whilst foreign investors buying property in Central London is hardly a new phenomenon, we have noticed the greater diversity of nationalities wanting to purchase here and witnessed how quickly world events have driven new enquiries to our offices. The Arab uprising in the Middle East, for example, coupled with the current weakness of the pound also means London property is better value to foreign buyers than before, despite values in some parts reaching new highs.
The lack of stock and competitive bidding has driven prices up. Large flats over 1,500 sq ft in Prime Central London, in particular, have increased significantly from April 2009-June 2011, rising some 81% according to our latest indices. Their international popularity is both because of the lifestyle they offer with elegant well proportioned rooms all on one floor, accessed by lifts as well as the security provided by on site concierges. They are ideal for those with multiple global residences who want to ‘lock up and leave’.
We have noticed many vendors in Central London deciding to benefit from the all time high prices by relocating slightly further out. John D Wood & Co.’s Battersea office has noticed that it is selling large family homes on Battersea Park to former Chelsea and Belgravia residents happy to move South of the River, and our new office in Chiswick is selling large homes to those moving west from Holland Park and Kensington along the Great West Road.
The Central London Property market has been in the news headlines for other reasons. The timing of the debate, which resurfaced at the Liberal Democrats’ Conference about imposing a “mansion tax” on homes over £2 million is interesting. Any increase in Stamp Duty Land Tax level above the 5% already imposed on properties above £1 million last April will have serious consequences for the property market. Personally I cannot see the electorate tolerating such a proposition and the Government would be foolish to inflict further damage to a market that has already halved in the number of annual transactions. HMG need to stimulate the market not stifle it.
For a start SDLT should be an incremental tax as opposed to having the rate calculated on the whole amount of the transaction. The impact on vendors whose properties are at the threshold of £1 million is serious as potential purchasers will not pay an additional £10,000 for a nominal increase in price. The Stamp Duty problem could easily be solved and more people would then be willing to move rather than staying and extending, so freeing up the stock shortages which continue in the marketplace. This would result in the Government receiving more tax and prices stabilising. I have no doubt that if the number of transactions increased then the associated ancillary services would also benefit as refurbishment works generally take place when people move.