Given the level of 
price growth in London since 2009 and the evolution 
of prime urban markets beyond the capital, the number of £1m+ sales in 2014 is expected to have been higher 
than 2007 for the first time.

The increase in the size of this market over the past decade has been huge. Over 10 years, the number of £1m+ sales recorded by HMRC across the UK has tripled, with an estimated 18,000 sales last year.

"Taxation is likely to be a key issue affecting the prime housing markets in 2015"

Little surprise then that it is a submarket that has attracted the attention of politicians across all parties looking for ways to raise 
tax revenues.

Taxation is likely to be the key issue affecting the prime housing markets in 2015. While the Labour party seemingly presses on with 
its increasingly controversial proposal for a mansion tax, the Chancellor has further raised the stamp duty liability at the top end of the market, while cutting the burden for the majority of the housing market. Many have viewed this as an attempt to outflank the opposition. Current evidence suggests that sellers of prime housing stock have absorbed this cost through a one off price adjustment to reflect the buyers additional liability. This seems to have allowed the market to remain fluid in the immediate aftermath of the changes.

However, it is still most likely to make political debate around further taxation even more contentious, even if, as expected, it has a mildly soporific effect on the market in the run up to the election.

This will mean sellers will have 
to be realistic on sale price in 2015. However, buyers should be able to take comfort from the medium term outlook for the market which remains broadly positive.

A year of two halves

How did the prime markets fare in 2014?

Much like the mainstream, the prime housing market across the UK saw a year 
of two halves in 2014. The improving economy and positive sentiment from the mainstream market helped drive demand in the first half of the year with an average price increase of 4.9% recorded in the 
prime markets of London and 3.1% outside the capital.

Some of this momentum was lost over the summer as the uncertainty surrounding the Scottish referendum and ongoing discussions around a mansion tax contributed to a general lack of urgency among buyers. When combined with the impact of the new rates of stamp duty introduced in the Autumn Statement, house prices remained roughly flat in the final six months of 2014 in the prime regions with an average increase of 0.1% while small falls of -2.2% were recorded in London. The experience of 2014, gives us clues as to what may happen in 2015 and beyond.

In London the strongest performers in 2014 were the markets up to £1m and in the £1m - £2m range. These saw annual price growth of 6.0% and 2.5% respectively, reflecting the fact that they are less adversely affected by the changing tax environment.

In the prime regional and country house markets, London commuter locations showed the highest level of growth, with prices rising by 4.6% in the London suburban markets such Esher, Rickmansworth and Loughton and by 3.7% in the inner commuter zone in the likes of Sevenoaks, Guildford and Beaconsfield.

Beyond the commuter zone prices still remain below the level seen prior to the credit crunch, presenting an ongoing buying opportunity for those looking to relocate.

Taken from
Residential Property Focus Issue 1 2015