Stamp duty surcharge "will force London new-build price falls" warning

JLL says the stamp duty surcharge on buy to let properties and second homes has obliged it to downgrade its forecast for new home prices in central London.

In November the agency - which is regarded as particularly strong in its analysis of the capital’s new build market - forecast that prices of central London new builds would show a modest 1.0 per cent price rise in 2016 followed by a 3.0 per cent rise in 2017 and 5.0 per cent in 2018.

But now JLL warns that prices will drop 3.0 per cent this year, stagnate with no change in 2017 and rise 4.0 per cent in 2018.

JLL says this has been driven by a deepening of global economic uncertainty, notably from China, but more significantly by the imposition of the stamp duty surcharge. 

“We are seeing a shift in appetite with purchasers now seeking long-term growth prospects in the medium to lower end of the price spectrum and our expectation is that demand in the sub-£1m market will remain buoyant throughout 2016, albeit with an increasing note of caution” explains Adam Challis, Head of Residential Research at JLL.

He cautions that new-build developments rely on off-plan investor sales, as owner occupiers typically chose to purchase new-build properties closer to the date of construction completion.  Off-plan sales are generally a pre-requisite for the release of construction finance, meaning that the viability of new developments is directly impacted by weakening demand from these purchasers.

“By including new build property within the [stamp duty] increase, government has directly undermined its own priority to boost housing supply. Furthermore, the change has made higher-density schemes demonstrably more risky, increasing the burden of new supply on suburban and greenbelt locations” says Andrew Frost, Head of Residential at JLL.