The Savills Repeat Sales Index – which is based on prices paid according to the Land Registry – claims that prices in London have risen by 78% on average over this period
More recently, however, this momentum has faltered. The first set back for the London market occurred at the end of 2014, with the restructuring of stamp duty land tax (SDLT) to a system of progressive taxation, a bit like income tax. This was a popular move as it reduced SDLT for 98% of the market, but it massively increased the burden at the top end and, consequently, Savills says that central London prices peaked in September 2014 and have fallen by 14.1% since then.
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Whether this slide continues, or London prices stage a bounce-back is, of course, uncertain. Strutt & Parker has neatly captured the extent of this uncertainty with the recent publication of its best- and worst-case scenarios for London property prices over the next five years. The spread is a huge variance of 23%, and it is symptomatic of the way that London property prices have drifted away from sound fundamentals. Sentiment will be the main determinant of the market over the next two years, according to Savills, and this sentiment is currently driven by domestic political uncertainty and the fall-out from Brexit.
Anecdotally, Brexit is already having a particular impact on the higher end of the rental market with many corporate tenants holding back from new commitments until the outcome of the Brexit negotiations is better understood.
The London market may have enjoyed a tremendous bull run, but more recently this has been checked – and it’s not over yet. In the interests of balance, however, we do need to remember that domestic and international buyers are still active and a weak currency makes London even more attractive to those with euros, dollars, yen and renminbi to invest.