London property: expect further price falls

The gap between London property sellers’ hope and reality is widening, says Merryn Somerset Webb, as property sellers wake up to a market slowdown.

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It is with a small sense of relief that I offer you this link to EstateAgentToday.co.uk. It tells the story of the central London property market in 2016 a story of fast falling prices that we have been predicting for a little too long.

According to data consultancy Lonres, the average gap between hope and reality (asking price and selling price) on a prime central London house today is over £100,000. Look to Mayfair, Kensington and Knightsbridge and that number rises to £170,000. And for some it's rather worse than that: Jamie Oliver has reduced the price of his house in Primrose Hill by £2m to a mere £10m.

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Overall, Savills expects prices to fall around 9% in London this year (after falls of 0.4% in 2104 and 3.3% last year). So what's going on? All the things we have been talking about.

The change in the buy-to-let tax rules is putting off investors who would be buying with a mortgage. The whopping stamp duty bills on high-priced property means that no one buys unless they are sure they are settling in for the long term. Note that Oliver's house at £10m would still stick the buyer with a £1.1m stamp duty bill: even in Knightsbridge that's going to pay your rent for a while.

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The prices themselves were getting just too high (however cheap money gets, there is still a price at which the number of real buyers is too low to absorb all the stock above a certain price level). The rise in luxury new-build supply across London means that buyers have enough choice that they might as well bargain as they clearly are.

And finally there is Brexit and the uncertainty that brings to financial folk. It's a perfect storm for London sellers. It also isn't anywhere near over yet: there are currently 14,031 £1m-plus houses for sale in London, says buying agent Henry Pryor. Last month 297 sold. That's quite a supply overhang: expect further price falls.

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