From our perspective May saw a welcome shift in the balance of power from sellers to buyers, with many sales agents and their vendors adopting a more pragmatic view on their pricing and negotiation strategy. A subtle change perhaps, but as a result we have seen a noticeable increase in the number of prime property price reductions taking place in May, and the attitude of sellers has softened as they become more willing to negotiate on terms to secure a sale. Of course you need a keen connection with the market to spot such nuances and it is therefore pleasing that Garrington clients have directly benefited from the shift. Our average reduction off an asking price increased in May to 13%, with one transaction peaking at a 20% reduction off the published asking price.
The fact that the availability of stock is no longer the main driver in the prime property sector is also borne out by the research carried out by the RICS and Hometrack. According to the RICS the volume of new seller enquiries has fallen by 3% amongst its members. Hometrack’s latest research suggests that whilst buyer enquiries to sales agents have increased nationally, the rate has eased back from April’s rate of 2.1% to only 0.4% in May. So, simple economics really, stock levels remain constant but demand slackens, presenting us with the opportunity to get the best possible deal for our clients. With the distractions of the Jubilee, Euro 2012 and the Olympics, only time will tell as to whether this is a temporary shift or a longer term adjustment.
Stamp Duty consultation published
HM Treasury published its findings at the end of May regarding the proposed further reforms to Stamp Duty and in particular provided clarity on two key issues likely to affect the top of the market, which arguably are of greater significance than the already introduced new Stamp Duty band rates. In addition to the changes announced in the Budget, the consultation puts forward a proposal to levy an annual charge against all properties worth £2 million or more which are owned by “non-natural” persons (broadly companies, partnerships and collective investment vehicles), with the proposed charges ranging from £15,000 per annum for properties worth between £2 million and £5 million, to £140,000 per annum for properties worth over £20 million. These charges will also rise annually in line with Consumer Price Index inflation.
The proposed charges together with other proposals surrounding Capital Gains Tax are sure to cause further pause for thought at the top of the market, as buyers seek advice from tax advisors on the tax structuring of current property assets and indeed that of planned future acquisitions.
International demand still rising
Despite the current and further proposed changes to Stamp Duty, demand from international buyers wanting to purchase a property in the UK and in particular London remains significant. Year on year to May 2012 Garrington has experienced a 66% rise in demand from international buyers. Factors such as the strength of the UK legal and educational system and general quality of life, are frequently given as reasons for wanting to buy in the UK, together with wealth protection.
The London property market has recently been cited by one financial analyst as one of three ‘safe havens’ for cash alongside gold and the Swiss franc. Accordingly, the prime London market has remained competitive and fluid in nature.
Without question, the ongoing Eurozone economic and political issues are having a direct affect on the UK economy and consumer confidence. This is directly affecting the UK housing market and breeding caution at best and in many cases delaying moving plans. However, property is still transacting but we find ourselves in a price sensitive market where only the best homes in the best locations remain sheltered from wider market influences.
Over the summer months, irrespective of the above factors, we remain confident that we can source excellent buying opportunities for committed and savvy buyers.
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