RESIDENTIAL RESEARCH
PRIME CENTRAL
LONDON SALES INDEX
FRESH STAMP DUTY UNCERTAINTY
EMERGES IN RECOVERING PRIME
CENTRAL LONDON MARKET
November’s stamp duty increase came as buyers and sellers have
shown early signs of absorbing last December’s rise, says Tom Bill
December 2015
Prices were flat in November, and
annual growth was 1%
Transaction levels were down
by a fifth in November versus 2014
November viewing levels were the
second highest this year after
October as demand picks up
Number of properties withdrawn from
sale between April and November this
year rose 12% versus 2014
Macro View: Taxing property
transactions
It has taken a year for the first signs to emerge
that buyers and sellers have begun to absorb
stamp duty changes announced in December
2014.
Though transaction levels in prime central
London in November were a fifth down on
2014, a growing number of vendors are
prepared to set asking prices that reflect the
more subdued state of demand and accept that
double-digit annual price growth is unlikely to
return in the short-term.
Furthermore, a degree of pent-up demand is
being released as buyers become increasingly
motivated after months of inaction, though this
has been hampered by a lack of stock in some
markets.
Annual price growth in December was 1%,
following no monthly change from October.
Recovering demand has translated into a rise in
viewing levels, which were higher in November
than the same month last year and the second
highest level in 2015 after October.
and second homes. It came as the prime central
London market was finding its feet after the
previous rise.
As a result, the primary effect has been to
disorientate buyers and sellers. While the
measure is unlikely to have the same dampening
impact on demand as the December 2014
change, it heightens the sense of uncertainty
after a series of tax changes in recent years.
The prevailing mood is one of caution
surrounding expectations for what further
measures may follow, the implications of which
are examined in more detail in the Macroview
section on page two.
Despite the tentative signs of strengthening
demand, the prime central London market
remains fragile and price-sensitive. Buyer
caution is related to higher transaction costs and
decisions are increasingly taken on a longerterm basis, producing a flight to quality for the
best properties and addresses.
However, November also saw the
announcement of a three percentage point
increase in stamp duty for buy-to-let properties
This sensitivity is underlined by the fact the
number of properties withdrawn from sale
between April and November this year rose 12%
versus the same period in 2014.
FIGURE 1
FIGURE 2
Price growth in prime central London
Declining price growth in prime central London
Price growth by price bracket since 2013
5.0%
TOM BILL
12 month % change
6 month % change
three monthly % change
monthly % change
3.5%
Head of London Residential Research
“This latest rise in stamp duty
came as the prime central
London market was finding its
feet after the previous change.”
2.0%
0.5%
Dec-15
Oct-15
Source: Knight Frank Residential Research
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
-1.0%
Jan-15
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Feb-15
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14%
13%
12%
11%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
Dec-13
Dec-14
Dec-15
up to
£1m
£1m
to
£2m
£2m
to
£5m
£5m
to
£10m
£10m+
Source: Knight Frank Residential Research
PRIME CENTRAL LONDON SALES INDEX
DATA DIGEST
FIGURE 3
Price growth in prime
central London by area in
the year to December 2015
The Knight Frank Prime Central London
Index, established in 1976, is the longest
running and most comprehensive index
covering the prime central London residential
marketplace. The index is based on a
repeat valuation methodology that tracks
capital values of prime central London
residential property. ‘Prime central London’
is defined in the index as covering: Belgravia,
Chelsea, Hyde Park, Islington, Kensington,
Knightsbridge, Marylebone, Mayfair, Notting
Hill, South Kensington, St John’s Wood,
Riverside* the City and the City Fringe.
‘Prime London’ comprises all areas in
prime central London, as well as Barnes,
Canary Wharf, Chiswick, Clapham, Fulham,
Hampstead, Richmond, Wandsworth,
Wapping and Wimbledon.
* Riverside in prime central London covers the Thames
riverfront from Battersea Bridge in the west to Tower Bridge
in the east, including London’s South Bank. The City Fringe
encompasses the half-mile fringe surrounding most of the
City including Clerkenwell and Farringdon in the west and
Shoreditch and Whitechapel in the east.
THE MACRO VIEW DECEMBER 2015
Prime Central London Index
6,387.5
Dec 15
Dec 14
Dec 13
Dec 12
Dec 11
15%
12%
9%
6%
3%
0%
Dec 10
Annual growth in prime central London over the last five years
RESIDENTIAL RESEARCH
TAXING PROPERTY TRANSACTIONS
The issue of stamp duty has dominated the
prime central London market in 2015.
governments and global financial institutions
on property taxation.
In January, buyers and sellers began to digest
higher rates for property worth more than
£1.1 million. It slowed transaction levels but
by November there were tentative signs of
strengthening demand.
“In countries with high transfer taxes, it simply
discourages transactions. In some cases
it changes behaviour to the point markets
become less transparent,” he told Knight Frank.
The Autumn Statement in November added
three percentage points to rates for buy-to-let
investors and second home purchases.
The proposal is subject to review but the
effect has been to disorientate a market
finding its feet.
Fewer transactions have reduced the tax
take in prime central London, an outcome
consistent with the Laffer curve, an economic
model which indicates that tax increases
beyond a particular rate can be counterproductive.
Excessive property transaction taxes
can produce “inefficient and destabilised
markets”, said Richard Grover, a senior
lecturer at Oxford Brookes and an advisor to
“That is not the case in the UK but the purpose
of the tax was to raise revenue not result in
buyers who are unwilling to transact,” he said
of the changes announced in December 2014.
Reform of council tax is a more effective way
of guaranteeing revenue and has a markedly
less distortive effect on property markets, he
said.
“Increasing stamp duty produces far more
sporadic results but is politically an easier
thing to do than the highly desirable but more
unpopular option of restructuring council tax.”
“Stamp duty changes in the UK have resulted
from the displaced need to tackle council
tax reform, which is highly visible and highly
opposed across the whole spectrum of the
market.”
Tom Bill
Head of London Residential Research
+44 20 7861 1492
[email protected]
PRESS OFFICE
Jamie Obertelli
+44 20 7861 1104
[email protected]
Daisy Ziegler
+44 20 7861 1031
[email protected]
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