Guest Blogger Johnny Morris Of Hamptons On The Sales Market

22 September 2015 |

The failure of the post-election bounce to materialise in prime central London (PCL) shouldn't come as a surprise. While we're prone to pinning our hopes of shifting market fortunes to exceptional one-off events, reality is normally much less cooperative. PCL is suffering the hangover from its past successes and indeed, excesses. The five-year run of sustained price growth from early 2009 further detached PCL from domestic demand, making it an easy target for tax hikes.

Three increases in stamp duty for homes above £2 million in that same period mean a buyer of a £3 million home now pays £275,000 upfront tax. That's not to mention the annual tax on enveloped dwellings and changes to capital gains tax. These increases were tolerable for buyers when prices were growing above 100% a year, but with future price expectations at zero or less, it becomes a daunting barrier to purchase.

In a liquid market prices would adjust to the change in taxes quickly, but with many discretional sellers and price expectations still high, the market has reached a stalemate. How long will it last? Well, there are signs of activity increasing, and the outlook is better than it was last month. But those hoping for an exceptional one-off event, say in the form of a tax cut, will be disappointed; there's no miracle cure for this hangover.