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Fall could be a lot chillier than usual for owners of London's prime properties, as the latest estimates from real estate agency Savills forecast falling or stagnant house price growth until mid-2019.
This follows a report from another agency, Knight Frank, showing a 1.8 percent annual drop in Prime Central London (PCL) house values in the year to August. Knight Frank puts the declining values down to unsustainable price growth in the four years leading up to a Summer 2014 peak, compounded by a series of changes to stamp duty, which were implemented in December 2014.
The higher duties have caused a shriveling of transaction volumes, with sales levels in five prime London boroughs falling by an average of more than 5 percent per year in the five years to March 2016 - the most since Land Registry records began in 1995.
According to Tom Bill, Head of London Residential Research at Knight Frank, "current rates of stamp duty have distorted market behavior across London to an extent not seen in the last 20 years."
The knock-on effect from a stagnant market tends to be falling prices as sellers try to stir buyer interest. More explicitly, the higher stamp duty charges are slowly being accounted for as deductions from asking prices. Hence, a key reason why areas where average prices - and therefore stamp duty taxes - are highest are seeing the sharpest price falls.
Bill says this effect is starting to filter through.
"Vendors are increasingly reflecting higher levels of stamp duty in asking prices but it is not universal as such changes take time to be absorbed by the market."
These price cuts have fed through to Savills' latest forecasts, which don't see growth returning to the PCL market until 2019. Indeed, the agency sees the market headed for a 9 precent tumble this year followed by two years of zero growth. From 2019, however, Savills sees a rapid pick-up, with a prediction for a rebound that year of 8 percent.
Lucien Cook, Savills U.K. Head of Residential Research, believes this reversal is "likely to be triggered by the return of opportunistic investors recognizing there is value to be had in the market."
Nonetheless, Cook has also observed some recent traction, saying, "We expect to see a gradual recovery in transaction levels as vendors become more accepting of where values now lie. We are already seeing many adjust their asking prices by 5-10 percent in order to achieve a sale."
In addition to the stamp duty hurdles, Savills highlights continued uncertainty surrounding Brexit as set to persist for the next couple of years. This particularly in regards to the as yet unknown outcome for European nationals employed in London's world-leading financial services industry.
Savills also cautions over the high level of new supply coming to prime London, with nearly 40,000 completions valued at above £1,000 ($1,300) per square foot scheduled for completion between 2015 and 2020. This is more than double the completions achieved in the previous five year period.
However, since the EU referendum, there is evidence of developers slowing, postponing or cancelling developments where pragmatic or necessary.
All of which suggests that for certain buyers, the current climate may present a window of opportunity to access this exclusive market. Values have certainly become significantly more compelling for those thinking of purchasing London property using currencies that have appreciated against the pound recently.
According to data provider LonRes, average values paid per square foot in US dollars have crumbled by 29 percent in the past two years, after price falls and dollar appreciation are taken into account. Similarly, buyers using euros are looking at a 26 percent fall in purchase prices since July 2015.
Furthermore, Charles Curran, Principal at Maskells Estate Agent, notes, "The areas where values are most likely to be strained are those where price rises have been overly reliant on mortgage debt. For example, in certain parts of SW8, prices have risen by 20 percent in recent years while debt balances have gone up by 30 percent. A mortgage rate rise or an economic slowdown could destabilize some borrowers' ability to repay, possibly leading to forced sales."