There was an easing of the sharp slowdown in the prime central London property market during the closing three months of 2016, according to estate agent Savills, as price cuts fuelled more transactions.
House prices have been falling in the prime areas of London following a number of tax hikes on expensive homes and property investors, in particular significant increases to stamp duty at the top of the market and on additional homes. The impact of the Brexit vote is also weighing on demand.
Savills said house prices in prime central London fell by an average of 6.9% year-on-year in the final quarter. The quarterly drop was 2.1%. But Savills cited research from the data firm LonRes showing sales volumes had actually recovered at the end of the year.
Sales of properties worth more than £1m ($1.2m) in the middle of 2016 were running at a level around half that of the previous year. In the fourth quarter, however, volumes were within 16% of 2015's full-year numbers.
In the outer prime London market, house prices fell by an average of 4% over the year and 2.3% on the quarter, said Savills. For the whole prime London market, including central and outer areas, prices are predicted to be flat in 2017 and 2018.
"Committed sellers increasingly understand the need to factor in both the additional stamp duty and economic uncertainty to their price expectations in order to attract still very cautious buyers," said Lucian Cook, Savills UK head of residential research.
"We saw a real dearth of transactions over the late spring and summer months following the race to beat the new 3% surcharge. But further price adjustments, coupled with the currency play for international buyers, appear to have triggered greater buyer commitment and prime London sales volumes picked up significantly in September, October and November before easing back in December."
He continued: "But buyer sentiment remains fragile. Improved transaction levels are the result of adjusted pricing and should not be seen as a precursor to price rises in the foreseeable future. High stamp duty rates and the uncertainty created by negotiations to leave Europe will still need to be factored into expectations on value."