"Committed sellers increasingly understand the need to factor in both the additional stamp duty and economic uncertainty to their price expectations in order to attract still very cautious buyers."
Savills forecast for prime London now anticipates no price growth over the next two years, with a recovery to trend growth not coming until 2019.
Average house prices across all prime London fell by 2.2% in the final three months of 2016. This left values down 4.9% year on year and 5.8% since the stamp duty increases of December 2014 and subsequent announcement of a 3% surcharge on additional homes effective from April 1 2016.
The highest value markets of prime central London continue to be most impacted by the stamp duty effect, with prices down by an average of 6.9% year on year, against a Savills forecast of -9.0% for 2016.
By contrast, in outer prime London, where the average value is just below £2 million, prices fell by 4.0% in 2016 and are down just 2.7% from where they were two years ago.
Lucian Cook, Savills UK head of residential research, said: “Committed sellers increasingly understand the need to factor in both the additional stamp duty and economic uncertainty to their price expectations in order to attract still very cautious buyers.
“We saw a real dearth of transactions over the late spring and summer months following the race to beat the new 3% surcharge. But further price adjustments, coupled with the currency play for international buyers, appear to have triggered greater buyer commitment and prime London sales volumes picked up significantly in September, October and November before easing back in December.”
“Recent market activity demonstrates the continued appeal of prime London property at the right price. But buyer sentiment remains fragile. Improved transaction levels are the result of adjusted pricing and should not be seen as a precursor to price rises in the foreseeable future. High stamp duty rates and the uncertainty created by negotiations to leave Europe will still need to be factored into expectations on value."
