The Chancellor’s shake-up of Stamp Duty last year continues to depress the prime central London market, latest figures show. With the freehold values of high-end flats and houses at their lowest levels for two years, and continuing to fall, it looks like an opportune window for leaseholders to extend short leases or go for collective freehold purchase.
The latest capital value index from Savills shows prime central house values have fallen by 4.3 per cent, and flat values by 4.75 per cent, since the huge Stamp Duty hike for properties over £937,000. This was in spite of a small seasonal fillip in the spring – values fell again through the summer, though more slowly than last autumn and winter. In contrast, prime outer London values have already begun to ease upward a little.
The market has also slowed significantly, with properties taking three weeks longer to sell on average. More than a third have had their prices reduced.
Of course, the market will recover, and the recent slowing of Stamp Duty’s negative impact suggests it may bottom out next year. It’s perhaps a stark measure of the Stamp Duty effect that even after the Lehman Brothers collapse in 2008, prime central London values only fell for six months. The drop was more dramatic, but so was the recovery: values were back to pre-crisis levels by early 2010.
So it’s time to be thinking seriously about extending your lease or exercising your enfranchisement rights, to take advantage of the current low values.
In a recession, the values of both the freehold and the leasehold fall – and the value of the existing lease continues to run down every day – so logically in these times, a lease extension is more appealing than selling a short lease.
But in practice, caught up in the overriding depressed market, people don’t extend their leases. After the crash at the end of 2008, many applicants withdrew their claims perceiving that it would be cheaper to wait – at best one year or at worst two years – and start again. Of course, by the time their new claim went in, their existing lease was a good one and a half years shorter, and approaching two and a half years shorter if they had originally served their Notice some months before pulling out and had taken the benefit of an assigned claim from the outgoing vendor.
Nearly everyone who pulled out ended up paying substantially more for their lease extension than if they’d stuck with their first claim. Remember that whatever the market is doing, for every day of waiting the leaseholder’s share of the cake goes down and the landlord’s goes up.
The only people who did well were those whose cases were about to go before the Tribunal shortly after the crash hit, and had the finances in place to go through with their extensions. With banks not lending and many leaseholders denied the funds to pay full pre-crash prices, landlords were prepared to accept big discounts to get deals through. Even the Grosvenor Estate was knocking 30 per cent off premiums.
So amidst the Stamp Duty doom and gloom, leaseholders may be able to take advantage. If you’d like to find out how I can help, I’d be delighted to hear from you!