According to house builder Berkeley, transaction volumes in London as a whole – so the number of houses being both bought and sold – have dropped almost a fifth since last year, with an 18% decrease.
Berkeley, who mostly develop sites across all areas of London, claimed in an interim results statement that pre-tax profits have shot up 36% to £533.3m over the last six months to the 31st October, with 2117 homes sold for an average fee of £719,000 – a significant rise on last year’s average of £655,000.
The company’s strong results have seen them completely revise their pre-tax profit guidance, with it going up to £3.3bn as opposed to £3bn, however they are expecting 2017/18’s results to be a peak high, before going back to their normal returns for 2018/19.
Berkely’s caution seems to reflect wider concerns about London’s housing market as a whole, which is currently in a position where years and years of excessive price growth is starting to see affordability pushed to its limit.
Possibly due to this, Savills – the estate agents – have predicted that London house prices will drop 2% next year, despite going up everywhere else in the country.
The firm have said that the factors which are driving the slowdown in transactions include a host of things, but namely the uncertainty surrounding Brexit, stamp duty hikes, and a tax change which means that from 2020, landlords won’t be able to take away mortgage interest costs when they tot up taxable profits.
Speaking about the matter, chief executive Rob Perrins elaborated more on the factors causing concern, and gave a clearer picture on the demand for property.
“There remains good underlying demand for property in London and the South East, but the combination of uncertain UK economic and political outlook and high property taxation continues to mean customers are more circumspect and inevitably purchasing later in the development cycle” Perrins said.
“Brexit uncertainty and concerns over growth and inflation, coupled with the changes to SDLT (stamp duty land tax) and mortgage interest deductibility, continue to impact the market.”