The wealthy are avoiding the London property market, with sales of “super prime” £10m-plus homes in the capital collapsing by 86% over the past year.
Just five properties were sold for more than £10m in the three months to August 2016, according to Land Registry data, compared with 35 in the same period a year earlier. Outside of London, not a single property was sold for more than £10m, compared with ten last year.
The average price paid also fell steeply, from £22m to £16.3m, said property group London Central Portfolio, which carried out the analysis.
Blaming increasing property taxes, such as the sharp hike in stamp duty and new obligations on foreign buyers, rather than Brexit, for the decline in activity.
Concerned developers are scaling down their projects, with one newbuild Mayfair block reworked to provide more, smaller, flats in a bid to find buyers.
Newbuild sales have slumped in particular, no super-prime newbuild units were sold over the three-month period, compared with last year where they made up 23% of sales.
The slowdown in the luxury property market should be “very concerning” for the Treasury leading to a decline in stamp duty receipts. The reduction in super-prime activity in the last three months meant the government could face a £45m fall in stamp duty receipts.
The sudden disappearance of super-rich buyers is forcing developers to reconsider their plans. “Many are looking to divide large, high-priced property into smaller flats to increase their attractiveness. Clivedale, for example, is reworking its flagship Hanover Square development to create four times more units, whilst the green light has been given to Citygrove Securities and McClaren Properties to replace seven Chelsea townhouses with smaller units.”
Rents are also falling, partly as sellers unable to find buyers choose to rent out their properties instead. Separate data from upmarket property agents Knight Frank found that rents in prime central London locations fell by 4.7% in the year to September, although the number of tenancies agreed reached a record high.
Sterling’s 20% devaluation since the EU referendum may bring foreign buyers back into the luxury London market. According to Juwai, which claims to be the biggest international property website for Chinese investors, inquiries were up 12% in August to a record high as the yuan-rich scout around for bargain buys in London.
Source: The Guardian