Prime London Property Market Update

Results just released from HM Land Registry show a mixed picture for the prime London property market. Average prices in Prime Central London increased by 3.7% over the quarter, meaning they are up 15.3% over the year and at a high of £1,350,101. This is 5.5 times more than the average price of £249,958 in England and Wales where prices have not seen any real growth, just 3.5% uplift over the last year.

Historically, Q3 has shown a positive increase in prime central London, showing the completions from transactions in Spring and Summer. Despite the seemingly negative press, the average price of a flat surpassed the £1m barrier for the first time, reaching £1,024,250 – an increase of 5% compared to the same time last year.

However, despite this increase, transactions continued to drop by nearly 9% compared to this time last year. Although this shows a desire by property investors to hold rather than sell a strong performing asset, without doubt the shake-up caused by the tax policy changes announced in the 2012 budget (with more to come), have caused some investors to ‘wait and see’.

The increase in Stamp Duty Land Tax to 7% for properties over £2m has had a much more obvious effect on Greater London, mostly a domestic market, than on Prime London Central (the City of Westminster and the Royal Borough of Kensington & Chelsea). Sales of properties between £2m and £5m in Greater London have fallen by a massive 53%, actually reducing the Exchequer’s SDLT income. Whereas, in Prime London Central, even considering the overall fall in the number of transactions, the sale of properties over £5m has gone up from 32 in Q3 2011 to 60 in Q3 2012 which is a huge 88% increase.

Hopefully, the end of the consultation period in December should straighten things out with regards to the future of investment into the prime London property market.