The Central London market is adjusting following years of tremendous growth. Yes, growth may be slowing, but this is to be expected; activity levels are normalising. Buyers and investors continue to jump in where they see a good price, good location or both across the capital.
London remains a great place to buy and invest – prices are forecast to double in the next 15 years, at a compound annual growth rate of 7% a year. The capital will continue to attract investors as well as homeowners who want to enjoy life in the buzzing city. Demand will remain strong in the face of regulatory changes.
Savills has predicted that transaction levels will fall until 2018, dropping by 16% by the end of this period. Forces driving this include changes to regulation and taxation, particularly for investor landlords, who have been affected by the additional 3% stamp duty, reductions in tax relief and impending mortgage regulation. This could put pressure on the private lettings sector, which would see increased demands unmet and a rise in rents. Cash buyers will be affected by stamp duty. While first-time buyers will be protected “to a degree” by government support, their challenge will continue to be raising a deposit. The hardest-hit buyers are movers with mortgages. The Treasury will feel the pinch on stamp-duty receipts, particularly if there is pressure on transactions at the top end of the market. This will have far-reaching implications for housing policy.