In prime central London, house sale numbers have seen significant falls of 41 per cent across the year, according to analysis of Land Registry Data for the first quarter of 2017 by London Central Portfolio.
Average prices have recorded a slight increase despite Brexit and residential tax changes impacting sentiment, though LCP warned this growth can be attributed to a number of factors and may not reflect any genuine underlying price appreciation.
In prime central London, average prices reached £1,914,789, following quarterly price growth of 4.6 per cent.
This has been buoyed by a greater proportion of more expensive properties being transacted, with an 8.5 per cent annual increase in transactions between £2m - £5m.
However sales in the first quarter fell 21 per cent compared to the fourth quarter of 2016.
Sales levels are the lowest level on record, even less than during the global financial crisis.
On a rolling annual basis, prices are now 5.4 per cent higher than two years ago in the first quarter of 2015, a result of investor preference for safe havens in the face of global uncertainty, coupled with discounted prices and a weak sterling, according to LCP.
This improves on the slight increase in the fourth quarter of 2016 of 2.2 per cent, following two years of negative growth.
Naomi Heaton, CEO of London Central Portfolio who analysed the data, said the increase in average prices is likely to reflect a greater proportion of higher value properties being sold, rather than any real underlying price growth.
"Transaction data shows that the £2m to £5m bracket was the most active last year, reflecting the only annual increase in sales (8.5 per cent). This can, in part, be attributed to international homebuyers taking advantage of significant price discounts offered on top-end properties and beneficial currency exchange rates.
"Prices are now 13 per cent cheaper for dollar denominated investors than the beginning of 2015.”
According to LCP, buyers are also increasingly acquiring in their own names, rather than in companies, or 'de-enveloping' their existing properties from corporate wrappers.
These properties are now captured by Land Registry.
This trend is most apparent at the top end of the market where the forthcoming ‘look through’ non-dom inheritance tax (40 per cent), coupled with the annual tax for enveloped dwellings (up to £218,000p.a.), has made purchasing through corporate wrappers less attractive. HMRC data reflects this, with a 14 per cent fall in owner occupied properties above £2m held in companies since 2013.
Ms Heaton added: “The distorting effect on average prices due to a greater proportion of higher value sales reflected in the quarterly statistics is removed by analysing Land Registry’s monthly index, which only records like-for-like sales.
"This shows a 3.2 per cent price increase in The City of Westminster whilst Kensington & Chelsea has seen a 0.7 per cent price fall over the last year.
"Once combined, this indicates a very low level of growth. With the unexpected result of the snap UK General Election, even this growth is likely to be reversed as confidence wavers once again”.
In Greater London, the average prices now stand at £610,141.
This follows lacklustre quarterly price growth of 1.2 per cent. Over the previous annual quarter (Q1 2016) price growth was just 1.5 per cent. Like prime central London, transactions have reached the lowest level on record, with just 82,694 taking place.
Sales in the first quarter fell 19 per cent compared to 2016 and 32 per cent on an annual basis.
Demand in Greater London weakened over the last quarter. Sales were down 19 per cent over the end of last year, whilst quarterly price growth also stagnated, seeing a marginal increase of 1.2 per cent.
Ms Heaton commented: “Greater London is principally a domestic market and these sluggish results reflect the current state of the UK economy. Issues such as Brexit and rising inflation are impacting the ‘feel good’ factor which drives buyers’ decisions.
"It is also due to new caps on mortgage lending restricting borrowing to 4.5 times salaries, hampering buyers’ ability to get onto the housing ladder or trade up. This is being exacerbated by the growing new build crisis which has seen international speculators pull back in the face of uncertain or negative returns. In 2016, we saw a 51 per cent decrease in new build sales above £5m in Inner London”.
In England and Wales average prices now stand at £284,487. This follows negligible quarterly price growth of 0.29 per cent.
Ms Heaton added: “Despite government initiatives to support aspiring buyers with reductions in basic rate stamp duty and their flagship Help to Buy scheme, sales in England and Wales remain concerningly low.
"They saw their biggest quarterly fall in six years in Q1, equivalent to the fall during the financial crisis. With falling transactions across every sector, the government needs to take a serious look at how they can get the property market moving again.”
