Market Insight - February 2017
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Cashing in

Homeowners dominate Prime London
Owner occupiers consistently make up the largest proportion of buyers in the Prime Central London market.

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Since 2011 home-movers and first time buyers together have accounted for at least 40% of sales, the largest group. Home movers alone accounted for 31%. In 2016 first time buyers made up 9% of buyers in Prime central London, broadly similar to the 8% accounted for by developers. Those buying second homes account for 20% of prime London purchases while investors account for about the remaining third.

Unsurprisingly first time buyers in Prime Central London are less important than in the past when prices were lower. Since 2011 the average price of a prime central London property has increased by 60% or £640,000, from £1,069,000 to £1,710,000. But the increase in earnings in the highest earning group has increased by about one tenth of this at 6%. This would seem to account for some of the fall in the first time buyer share, although the increase in stamp duty on properties above £1m from December 2014 is likely to be more important.

Even though first time buyers in Prime London have a 45% deposit on average, the additional stamp duty burden is likely to weigh more heavily on them.

For a select few first time buyers, their ability to service a mortgage doesn’t affect whether they’re able to buy. Nationally around 4% of people buying their first home paid for it in cash last year, but in Prime London neighbourhoods it was 10%. These cash rich first timers paid on average £840,000, usually sticking to small flats in cheaper places.

It’s likely that 2017 will bring more first time buyers and owner occupiers back to Prime Central London. A combination of higher Stamp Duty for investors, falling prices and stagnant rents mean for now, some landlords and developers are looking elsewhere. Prices in areas that are traditionally favoured by owner occupiers are likely to continue outperforming neighbourhoods where investors have bought into.

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