Is now a good time to score a (relative) bargain on luxury new build property?
- Credit: PA Wire/PA Images
As new research shows sales of super prime London new builds plummeted by more than 80 per cent, is now a good time to get a good deal on a high end home?
Sales of new build property priced above £5million (classed as super prime) fell by 83pc in the six months after the Government introduced the additional three pc on second properties compared with the same period in 2015 according to figures from residential property advisor London Central Portfolio (LCP).
The research also found that sales on new and existing property priced above £10m fell from 61 in Q2 and Q3 2015 to only 15 a year later. Sales of properties priced between £5 and 10m halved, while property priced between £1 and £5m fell by more than a third.
The residential property investor blamed the fall in sales on successive increases to transaction costs with George Osborne’s stamp duty hike on properties priced at £937,000 and above followed by an additional three pc levy on second homes introduced in April 2016. It said these effects had been compounded by political uncertainty surrounding the EU referendum.
The LCP report also warned that the government may have missed out on nearly £0.5bn in the last six months as a result in the drop in sales activity on property over £1m, although HMRC figures show an increase of 10pc year on year.
Naomi Heaton, CEO of LCP said: “It is about time that the Government understands that the political posturing that has made foreign investment the scapegoat for our UK housing crisis is having an entirely negative impact.
“A contraction of the luxury market will not miraculously provide new homes for the domestic market. It will simply reduce tax take and damage the wider economy as affluent investors spend their money elsewhere.”
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Mark Pollack, director of high end estate agent Aston Chase, suggested that, although troubling, the figures represent an opportunity for buyers to secure a deal on high end property, especially when buying from a developer.
“Developers aren’t necessarily adjusting their headline prices because they don’t want to devalue their developments but in some cases big offers are being taken. It wasn’t that long ago that people were reticent to make a lower offer because they didn’t want to look silly.
“Don’t be scared to make offers at levels that previously you mightn’t have expected them to entertain. We’ve done some quite creative deals recently where people are paying in stages, putting a certain amount down up front, moving in and occupying the property and then paying over time.
“A lot of properties are fully furnished and, while technically the furnishings aren’t included, if a buyer’s in a strong position that could change.
“Proceed with caution. Property is and will remain a very sound investment but in a challenging market you’ve got to be sure you’re getting a good price.”
Developers in London are certainly feeling the pinch. In November, Barratt London, who have several large high end developments in the pipeline, including Kidderpore Green, said it had cut prices on some of its homes price above £1m.
Meanwhile last week the Berkeley Group announced that reservations for its homes had dropped by a fifth since the EU referendum.
Roarie Scarisbrick of buying agency Property Vision said: “Off plan new builds have historically attracted investors because owner occupiers want the instant gratification of being able to move straight in and it’s the investors that were stripped out of the market at the end of last year and the beginning of this year.”
However, he points out that the figures only show up to October 2016 and suggests that the next set of figures may show some improvement.
“Anecdotally I’m seeing a lot more activity than we have done for the last year, although I don’t know how much that will register on the scale given that we’re coming from a very low base.
“We’ve started to see an interest in currency play coming into effect with a good deal of activity from Chinese buyers from the lower end of the market to the very top, as well as plenty of dollar denominated buyers and Middle Eastern buyers. They’ve got a currency advantage but their also here because there are signs that this is a suppressed market.
“In a lot of cases developers are now being quite realistic and some of them are offering discounts.”