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HM Land Registry Results just out: Domestic market sees massive falls in transactions and prices PDF Print E-mail
Friday, 23 September 2016
According to just released Q2 2016 data from HM Land Registry, residential markets across the UK were already suffering, pre-Brexit. The only exception was Prime Central London’s (PCL’s) mainstream private rented sector, where quarterly price growth was robust (+6.6%) despite recent tax changes and global economic uncertainty. 

Demonstrating the distorting effect of recent changes in tax legislation, sales volumes fell dramatically everywhere in Q2 following a rush of activity during the previous quarter, as buyers sought to be beat April’s 3% Additional Rate Stamp Duty (ARSD) deadline.

Outside Prime Central London

Greater London

Average Prices now stand at £558,082

Prices fell 7% vs Q1

15,412 sales were registered, representing a 44.5% fall vs Q1

England and Wales

Average Prices now stand at £268,713

Prices fell 4.45% vs Q1

Just 115,895 sales were registered, a 30% fall vs Q1 and the lowest quarterly level on Land Registry record.

The UK’s domestic markets witnessed dramatic falls in prices and transactions in Q2, despite record low mortgage rates and Government efforts to decrease basic rate Stamp Duty. In Greater London as a whole, average prices fell 7% over Q1 to £558,082 with a corresponding 44.5% decrease in sales.

Across the rest of the country, average prices fell 4.5% over Q1 to £268,713 with only 155,895 sales taking place, a 30% decrease over Q1 and the lowest quarterly number of sales on land registry record. This is down from a pre-credit crunch average of 245,173.

Naomi Heaton, CEO of London Central Portfolio (LCP), who analysed the data, comments: “Whilst we have seen falls in mortgage rates and reductions in basic rate stamp duty for the majority of the market, the surge in prices experienced over the last few years in Greater London has stuttered. The market has suffered this year in the face of the new additional 3% Stamp Duty and a brewing new build market crisis which has seen a 43% fall in sales compared with last year.

“Likewise, registering the lowest number of sales since Land Registry records began in 1996, the fall in sales in England and Wales is very concerning, particularly given additional Government schemes to augment first time buyer numbers. With harsher salary caps on mortgage lending impeding buyers and Brexit uncertainty affecting sentiment, growth in both these domestic markets is expected to slow further across the rest of the year as buyers battle with the new normal.”

Prime Central London

Flats and Maisonettes

Averages Prices now stand at £1,319,654

Prices increased 6.6% vs Q1

436 sales were registered, representing a 66% fall vs Q1.

Houses

Average prices now stand at £3,437,497

Prices fell 20.9% vs Q1

Just 62 sales were registered, representing a 70% fall vs Q1

Representing 88% of PCL sales in Q2, the mainstream ‘Flats and Maisonettes’ sector, where average prices stand at £1.32m, has continued to show positive growth despite Brexit pressures and changes in tax legislation. In Q2, prices increased a robust 6.6% over the previous quarter.

According to LCP, this market predominantly comprises one and two bedroom flats making up PCL’s Private Rented Sector, where pricing traditionally shows a far more consistent performance than the discretionary upper end of the market. As demonstrated by Q2’s positive performance, the raft of new residential taxes has had limited impact and this sector is expected to continue to see price growth. Next quarter, in the immediate aftermath of Brexit, price growth may benefit from the devaluation of sterling which has increased overseas appetite.

PCL’s ‘Houses’ sector, on the other hand, has been hardest hit by the introduction of new taxes. It has seen three rises in Stamp Duty between 2012 and 2015, in additional to the introduction of the Annual Tax for Enveloped Dwellings, typically targeting top-end property. Only 62 sales were registered during Q2, representing a 70% fall over Q1 2016. Average prices for houses also fell 20.9% over Q1 and now average £3.4m.

“As LCP predicted last quarter, a discernible price correction has taken place in Q2 for PCL’s ‘Houses’ sector, following an influx of discretionary capital in Q1 as buyers sought to beat the 3% additional rate Stamp Duty deadline. Historically, in the face of economic and political turmoil, the high value houses sector witnesses far more volatility than the lower value ‘Flats and Maisonettes’ sector. Over the rest of the year, this market is likely to experience continued instability in the face of Brexit uncertainty and new taxes, such as the forthcoming non-dom inheritance tax. To capitalise on current market conditions, investors should instead focus on the lower value end of the market which continues to show positive growth” comments Heaton.
 

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