As we discussed in a recent post, stamp duty rates on all buy-to-let purchases and second homes are due to increase by 3% as of April 1st. So the next couple of months are clearly going to be a key time for anyone who wants to invest in prime London property before the changes come into effect. This fact may go some way towards lifting the upper end of the market in the first quarter of the year, as buyers rush in to make a purchase at the lower rate while they still can.
To recap, Stamp Duty Land Tax (SDLT) is currently payable at the following rates on residential properties costing above £125,000:
• 2% on the value of the house between £125,001 and 250,000
• 5% on the portion between £250,000 and £925,000
• 10% on the portion between £925,001 and £1.5million
• 12% on the value of the house above £1.5million
So if you’re buying a second home in prime Central London costing upwards of £1million, it’s easy to see the difference that this 3% uplift will make on the price of the house.
This increase is also of course on top of previous increases in stamp duty that took place in late-2014 and the current situation has led to what the International Business Times has referred to as a ‘stand-off’ between buyers and sellers in areas such as Chelsea and Kensington, with buyers demanding a discount on property prices and sellers being reluctant to provide these. So for anyone looking to purchase prime London property but who is prepared to see beyond the short-term hit of stamp duty, now is a key time to invest with reduced competition.
Increases in prime London property prices slow
As an additional consequence of buyer reluctance in prime London markets, house prices in areas such as Chelsea & Kensington and Westminster have also risen far less dramatically than in the ‘more affordable’ outer boroughs such as Barking & Dagenham and Hillingdon. According to the Evening Standard, the average house prices in these boroughs rose by 15.3% and 15.2% respectively, whereas prices in prime Central London have risen only ‘modestly’.
Prime London moves south
In November we looked at how those properties at the lower end of the prime London property market (£1million and below) were performing best in the face of uncertainties over stamp duty changes. We also predicted that this could increase the viability of areas south of the river – such as Greenwich, Vauxhall and Woolwich – as prime investments, as these areas have an abundance of such properties and are increasingly being seen as attractive locations.
Accordingly to Savills, other up and coming areas of prime London can be found in the southwest of the capital, notably in Clapham, Battersea and Wandsworth. Named as ‘sought after locations’ in the report, these areas, it says, owe much of their appeal to the substantial development and regeneration that has taken place there over the past couple of decades.
As the report points out, “In 2015, the average sale price for Battersea, Clapham and Wandsworth was £728k… this is a third higher than the Greater London average of £546k, but offers a significant discount compared to north of the river [locations such as Fulham and Chelsea].”
If you’ve got a property to rent or sell in these emerging prime locations or others like them, get in touch with Vanet for a professional valuation.
Upswing in prime London rents
In Property Wire meanwhile, it has been reported that the prime London lettings market could soon be making an upswing. According to the publication, prime London rents are set to rise by 5% over the next 12 months, compared to a 1.9% increase during 2015. The most significant increases, it says, will be for those properties with rents currently under £750 per week, with major growth occurring at the start of the year.
It’s not just prime London rents that have increased though, but the average length of tenancies too. The report found that the average length of tenancy increased by 18% over 2015, from 19 months to 23 months.
Vanet’s Joel Brookes commented that, “generally across London we’re seeing tenancies lasting longer. There are many reasons for this, such as a decrease in the availability of leased properties, and the fact that two-year tenancy agreements are increasing in popularity.”
“For those renting out property in prime London locations, these figures can only be good news, while renters appear to benefiting from increased stability.”