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London prime property market report

Spring 2015

The unexpected general election outcome created such a sigh of relief from Londonís financial district, as well as from overseas and domestic investors, that The Shard might have blown over, had it not been built to withstand a major storm!

The Conservatives are a ‘known quantity’, so a majority Tory government is seen as positive, by voters and money markets alike. Economic uncertainty has receded, helping maintain London’s reputation as the world’s leading financial centre. Overseas investors’ continue to view it as a safe haven for their money.

Conservative victory also means no Mansion Tax, no rent controls or mandatory landlord registration, and no further changes to Council Tax and Stamp Duty. ‘Non-dom’ status continues to be unrestricted and the government promises to increase the inheritance tax threshold to £1m.

London is the centre of government, the law and the financial sector and the very epicentre of fashion, food, culture and commerce. That combination of stability and vibrance will continue to attract global businesses and people who are very keen to live here.

These factors strengthen the market. Here at London Property Search we have already witnessed renewed positivity. We’d identified a property for a client, and he wanted to purchase it, but hesitated until the election result. He exchanged contracts first thing the next day.

Last year the number of £2m+ property transactions fell by 49%. This morning two new clients – with budgets of £3.5m and £7m respectively – asked us to proceed with their searches immediately.

So, what will be the impact of this renewed faith in the London property market? We saw significant price drops in Prime Central London areas during the second half of last year. In the first three months of 2015 some areas saw a little growth, but this was more the exception than the rule. In super-prime Central London, supply exceeded demand over the last nine months and this caused prices to stagnate in those areas.

On Monday morning we received a deluge of emails and phone calls from agents, developers and other off-market sources informing us of more new properties coming to the market – more than on any other Monday this year! Sellers seem to have also caught the mood of optimism. We may have been instructed by two new buying clients today, but the disparity between supply and demand won’t equalise or reverse overnight.

Renewed confidence in the property market will certainly encourage buyers, but most of 2014’s Stamp Duty and Land Tax rises still need to be absorbed. Concerns about interest rates may also influence buyers. And if vendors are too greedy – our sources think this is possible – there could be resistance from buyers.

The peak prices achieved at end of Q2 2014 meant that London looked expensive from a global perspective. That is why we believe prices are likely to increase gradually, rather than rising quickly now. There may be some initial price rises due to those holding back before the election on £2m+ but this will settle down as more property comes onto the market.

All this means a more attractive market for buyers in the next few months, as they benefit from greater choice and some limiting factors on prices. Whatever the market does we will ensure our clients get the best possible advice, guidance and service – as we have done throughout the 20 years since we became one of the founders of the property buying agent industry.

Sarah Van der Noot – Managing Director, London Property Search.

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