Savills World Research
UK Residential
Market in Minutes
Prime London
Residential Markets
April 2015
SUMMARY
Higher taxes and usual election uncertainty stalls house price growth in prime London
■ Overall, prices across prime London
saw small falls in the first quarter of
2015 resulting in an annual fall of
-1.6% over the year to March 2015.
■ The prime markets of Islington,
Wapping and Canary Wharf saw
the strongest performance as
prices continue to show positive
annual growth.
■ Looking forward, we are
forecasting that prices in the prime
London market will rise by 22.7%
over the five years to the end of 2019
assuming no further taxation of high
value property.
Table 1
Prime movements in prime markets to Q1 2015
Central
London
North
West
London
South
West
London
North
London
East of
City
All Prime
London
Q on Q
-1.1%
-0.6%
-0.2%
-0.8%
-1.5%
-0.5%
Y on Y
-4.3%
1.8%
-2.6%
6.2%
4.0%
-1.6%
5 Year
30.8%
30.7%
38.1%
45.6%
41.6%
36.6%
Source: Savills Research
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Market in Minutes | Prime London Residential Markets
April 2015
Prices in the prime housing markets
of London fell marginally (by -0.5%)
in the first quarter of 2015. This follows
an average -2.6% price adjustment
in the final quarter of 2014, that was
triggered by the stamp duty reform
announced in December’s Autumn
Statement. It means that the 12-month
rolling average for house price growth
in the prime London market has now
slipped into negative territory.
TABLE 2
As we forecast in November,
uncertainty regarding the general
election and the potential for further
taxation of high value property have
contributed to a subdued market in
the first part of 2015.
Source: Savills Research Fully taxed
The prime central London housing
markets, that have been most affected
by increased stamp duty charges, are
looking fully taxed. This has meant
sellers are typically having to factor in
price adjustments equivalent to the
stamp duty increase. Consequently,
in central London values are down
-4.3% year on year.
The markets of prime south west
London have been similarly, but less
significantly, affected. Buyers have
become increasingly aware of the high
cost of moving, which has tempered
demand in the higher value parts of
that market. By contrast, the markets
of Islington, Wapping and Canary
Wharf continue to show positive
annual growth, despite a general
sentiment-led easing in values in the
past six months.
In part this reflects the fact that
lower tiers of the prime market have
remained the most robust, with the
market below £1m generally
Prime London house price forecasts
Central
scenario*
With full
mansion tax**
as per Savills estimates
2015
2016
2017
2018
2019
-0.5%
7.0%
5.5%
4.5%
4.5%
-5.0%
2.0%
7.5%
5.5%
5.5%
5 Year
22.7%
15.9%
*Assuming no mansion tax but allowing for revision of the council tax system
**Assuming the mansion tax is introduced in 2015
NB: These forecasts apply to average prices in the second hand market. New build values may not move at the same rate
benefiting from the stamp duty
changes and unaffected by the political
focus on taxation.
Interestingly, the softening in the
London markets has corresponded
with a pick-up in the number of
Londoners circling the country
market. Prices of homes below the
£2m threshold in the prime regional
markets beyond London continue to
show year on year price growth, and
rose by 1.1% in the first quarter of the
year. However, market activity beyond
London is still partly constrained by
pre election caution. n
Uncertainty over election
has stalled the market
Lower tiers of prime
market remain robust
Outlook
Market awaits election result
While the fundamentals of demand and supply
remain sound, the short term outlook for the prime
property market is heavily dependent on the extent
to which the election brings political certainty and
whether the sector is subject to further taxation.
Certainty will, at least, allow buyers and sellers alike
to take account of the impact of any fiscal change, as
the all important autumn market approaches.
We are forecasting that prices in the prime London
market will rise by 22.7% over the five years to the
end of 2019 assuming no further taxation of high
value property. In this case we would expect a
relatively swift bounce back in values as was seen
in 1998 and 2002, when price falls in central London
were contained to less than 5% and recovered lost
ground very quickly thereafter.
In the event of a mansion tax, we are forecasting that
they will rise by a net figure of 15.9% over the same
five year period, with the strongest growth in the
markets below £5m where any charges are expected
to be least aggressive.
Savills Research team
Please contact us for further information
Savills plc
Savills is a leading global real estate service provider listed on the London Stock
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Lucian Cook
UK Residential
020 7016 3837
[email protected]
@LucianCook
Sophie Chick
UK Residential
020 7016 3786
[email protected]
@SophieChick
Kirsty Lemond
UK Residential
020 7016 3836
[email protected]
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