There has been a 20% fall in demand for new-build homes and interest in the London housing market due to the EU Referendum.
With the Brexit vote house builders Berkeley Homes has reported a 20% decrease in the number of reservations for new-build homes following plans not launched any new London developments this year.
The London luxury property market was already cooling due to the changes in stamp duty from April 2016 increasing the cost for homes priced over £925,000 and changes in rules making it less attractive for buy-to-let investors.
London estate agent Foxtons has warned and revenues and profits for the year are expected to be lower due to the Brexit vote and uncertainty in the London property market.
Luxury home sales lower from Berkeley
To April 2016 Berkeley sales were 3,776 a reduction of 4% over the year with average property price at £515,000 compared to £575,000 last year.
For home movers wanting to trade up when prices are rising, they may find their next property is more expensive which means they need a larger deposit or mortgage.
The average sales price at Berkeley is twice that of other house builders due to the company’s exposure to central London and leaves it exposed to uncertainty with the Brexit vote.
Their luxury property developments are in demand from home movers, first time buyers as well as buy-to-let investors and they have future orders of £3.25 billion. The company pre-tax profits for the year were lower by 1.6% at £530.9 million.
With the high demand for family homes in London, Berkeley has developed an innovative design for a three story house with a private roof garden rather than back garden.
This allows them to build twice as many homes on the site with new developments built at Kidbrooke Village in Greenwich.
There may be fewer suitable homes on the market as remortgage buyers can avoid downsizing and agree a lifetime mortgage to repay the residential loan to their lender.
Foxtons share price falls
The share price of London specialist estate agents Foxtons has reduced by 36% after the results of the EU Referendum.
Foxtons has given revenue and profit warnings as a result of significant uncertainty for the London property market due to the Brexit vote saying the upturn in the second half of the year is now unlikely to occur.
Nic Budden, chief executive of Foxtons has said the uncertainty around the EU Referendum and increase stamp duty tax for buy-to-let landlords is responsible for the slowdown in second quarter sales.
From April 2016 stamp duty for new buy-to-let properties has increased by 3% on the whole purchase value which also applies to people buying a second home.
The following table shows how this is changing:
| Property Values | Standard Rates | Buy-to-Let Rates |
|---|---|---|
| Up to £125,000 | 0% | 3% |
| £125,000 – £250,000 | 2% | 5% |
| £250,000 – £925,000 | 5% | 8% |
| £925,000 – £1.5m | 10% | 13% |
| over £1.5m | 12% | 15% |
Mr Budden has said the referendum has increased uncertainty and this is likely to continue for the remainder of the year.
Although Foxtons reported turnover higher by 4.1% to £149.8 million the pre-tax profits for the year were lower by 2.6% at £41.0 million.
Older equity release buyers can stay in their home rather than downsize avoiding the expense of stamp duty by accessing the wealth in their property with a lifetime mortgage.
To reduce exposure to the volatile luxury central London market, Foxtons is expanding their geographic area to the better performing mid-market throughout Greater London.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
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