We are seeing increasing evidence that property prices in London have been turning downwards – perhaps falling as much as 10% in the City of London according to some estimates. However even such a small area as the City hides a broad variety of price movements relating to area, property type, size and asking prices and what applies overall may not be an accurate representation of trends in very specific areas like the Barbican or for specific sizes of properties..
In general analysis of the housing market is seeing falling prices across the board ever since the Brexit referendum, but this is perhaps too simplistic as other factors also need to be taken into account – not least the increased stamp duty land tax (SDLT) requirements on properties valued at over £925,000 and £1.5 million introduced in December 2014. With almost any Barbican property larger than a one-bed falling into one of the higher SDLT brackets these larger properties have perhaps been more adversely affected accordingly.
|Table: Property or lease premium or transfer value||SDLT rate|
|Up to £125,000||Zero|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
Going a step further, if you are buying what is in effect a second home, or a buy-to-let property, the SDLT rates which then apply were set 3% higher than those in the above table in a new budget in 2016 so, for example, a £1 million property would attract a marginal rate of 13%.
As an example, if you buy a second property costing £1 million, the SDLT you owe is calculated as follows:
- 3% on the first £125,000 = £3,750
- 5% on the next £125,000 = £6,250
- 8% on the next £675,000 = £54,000
- 13% on the final £75,000 = £9,750
Total SDLT bill = £73,750
That is a pretty hefty hunk of tax to add to agent’s fees and loan costs and is almost certainly a disincentive to such a transaction which will be having an adverse effect on the purchase of high end properties as a second home or a buy-to-let.
ThSDLT levels for second homes could also be affecting the purchase of say a studio flat – costing around £500,000 – as a pied a terre. SDLT on such a purchase would total £30,000. Again something of a disincentive to buying adding 6% to the initial purchase cost.
However, as we noted in Barbicania on page 5 of this issue, Barbican properties are almost certainly going to be upvalued once the Elizabeth Line opens, due at the end of the current year, and this may counter some of the adverse effects of Brexit and SDLT on Barbican valuations.
Also it’s worth taking into account the old adage that ‘it’s an ill wind that blows nobody any good’. As can be seen from several of the estate agents’ comments below, the Barbican lettings sector is going through a pretty positive phase with some people wanting to live in the area choosing to rent rather than buy until some of the current sales market uncertainties are resolved. This could well also benefit Barbican property owners who are renting out rather than selling into what they may see as a buyer’s market. To set against this, however, the government seems to be targeting the private landlord sector with some increasingly onerous legislation.
Coming back to the overall market, local agency, and Barbican Life advertiser since the magazine’s inception 15 years ago, Hurford Salvi Carr, did note in its latest half yearly review of the marketplace that after three challenging years in the residential market, prices across Midtown, City and East London are now back at 2013/2014 levels. The mainstream market for properties, seen as those priced between £500,000 and £1 million, showed price falls of some 4% in 2017 according to HSC, after having held their values in the first 6 months of that year. Larger properties priced above £1m look to have experienced corrections of up to 10%, which will be due to the combination of Brexit and SDLT and this trend will have continued. These falls tend to tally with those estimated by other market analysts.
However, we will say that the Barbican remains a bit of a micromarket of its own. While Barbican apartments may not appeal as much to overseas buyers as new builds they do retain a positive domestic image and offer much the new builds do not in terms of amenity value. We may be going through something of a pricing hiatus but we doubt this will continue for long and once the Brexit negotiations are complete and the Elizabeth Line has opened we would anticipate a resumption of the upwards valuation path – at least for the smaller apartments. SDLT increases may put something of a damper on price gains for larger apartments for a couple of years yet but we suspect the Barbican will remain a go-to property market and will yet command good growth premiums in years to come.
LOCAL ESTATE AGENTS’ COMMENTS
These comments are from the Barbican property specialists who advertise in our pages, and dominate sales and lettings on the estate. They relate to current market conditions for the Barbican itself and the surrounding area.
Tina Evans at Frank Harris: For those of you who monitor the property websites, it is probably no surprise to learn that the sales market is not quite as active as it might be. Despite having some amazing flats (and houses) within the Estate for sale, it seems that a lot of potential buyers have decided to sit on their hands for now. Possible reasons for this? The continued uncertainty over jobs in the City and the occasional rumour about a major company considering a move to another European city, the increase in stamp duty for second homes and the possibility of imminent interest rate hikes. Yet there remain several reasons why a property purchase should not be put off; interest rates are still at an all-time historic low with plenty of fixed rate mortgage deals available, the opening of Crossrail/Elizabeth line is due next year and is certain to bring more people into the area, the market itself is not uniformly affected – with the higher end being the more subdued, there are good opportunities to trade up. www.frankharris.co.uk
Nick Scott at Scott City: The City market as a whole has continued to be tough, The Barbican market is slowly improving as we move toward the middle although price sensitive so owners are pricing their properties accordingly. This has encouraged activity which is resulting in an increase in viewings. Fortunately The Barbican continues to be popular and a desirable place to live.
Alex Childs at AW Childs: It’s been a record quarter at AW Childs. Current stock levels are high and the key to making the most out of the current market conditions is price and enthusiasm. www.awchilds.co.uk
Glen Cook at Hamilton Brooks: The second quarter of 2018 is pretty steady, but patchy, some apartments are selling and some are struggling, any overvaluation and the market will soon be wary. Days are gone where buyers would view anyway, so more important than ever to listen to someone who knows the market’s intricacies. Now is not the time to be bullish, just more realistic. We believe stamp duty is to blame not Brexit fears. We still predict zero growth but perhaps even more likely a reduction of 2 or 3% in the next 12 month period. www.hamiltonbrooks.co.uk
Tom O’Halloran at Thomas Michael: The market remains steady and if well presented apartments are priced realistically then sales are being agreed in reasonable time frames. We’ve received continued enquiries for Barbican flats. www.thomasmichael.co.uk
Joe Davison at Scott City: The current market in the Barbican and local area is very good and we have plenty of clients on our books looking specifically for Barbican properties. Once again our main issue is the level of stock we currently have available. www.scottcity.co.uk
Glen Cook: Still good news for Barbican landlords: Rents & demand is up, but supply has fallen. Some historic landlords have taken profit and sold up, which is understandable bearing in mind gains made over the last 5 to 10 years. New Landlords/Investors will gain from lower prices than 2 years ago and increased rents.
Mark Scoging at AW Childs: We have seen rent prices hold very strong and, in some cases, increase. We are continuing to see the rental department here at AWChilds Estate Agents expand and we continue to stay very confident for a positive rental market for the year ahead.
Tina Evans: For flat owners who would rather not try to sell in a relatively quiet market, our rentals department is still fully occupied letting Barbican properties to excellent tenants. Whatever the scenario, be it sales or rentals, the presentation of a property is the key to success.
Tom O’Halloran: The lettings market remains buoyant with continued enquiries for Barbican flats and applicants, mainly professional couples, registering to commence June and July tenancies. Savvy tenants are conscious that to secure a well presented Barbican flat they need to register with the agent and not just wait until the listing appears on the online portals. We have seen demand outstripping supply, often getting several good applications for each flat and welcome new instructions. www.thomasmichael.co.uk