This torpidity is likely to spread further down the market. “If you choke off the top end of the top end, that has an effect all the way down,” warns Douglas & Gordon’s executive director, Ed Mead. “It’s like a Chinese lantern or an accordion. If you cut the top off it, the whole thing starts collapsing. And people don’t understand that about London.”
According to Mead, the situation is a direct result of Osborne’s scrapping of the “slab” system of stamp duty, as well as the considerable increase of stamp duty rates on properties worth over £500,000. This has created a stand-off between buyers and sellers within the market, a situation which usually normalises in around three months.
“This has been going on for well over a year”, says Mead, “ever since the pre-election Mansion Tax talk, which started in November 2014. That has just caused a crash in volumes because very few people are moving. That is going to have an effect all the way down. People aren’t moving into London from places like Battersea so they’re not selling their places there. People who would normally buy there can’t get in. It’s having a real constipating effect that means that for those people who do want to buy, they’ve probably got to pay a bit more, or they’ve got to find someone who is desperate to sell. It’s an increasingly unhealthy situation.”
Douglas & Gordon reached the exact figure of a 64% fall in the sales of properties worth £2 million or more by comparing 2015’s data with 2013’s, focusing on the closing nine months of each year (they chose to disregard 2014 due to it being an abnormal year for the property market.) The estate agency’s head of research, Andrew Monteath, strongly suggested that Osborne will need to go back on his stamp duty hike on high-end properties if it leads to lower revenue for the Treasury – the opposite of the Chancellor’s intended outcome – as has been predicted.
However, there is a chance that the current uncertainty in the world economy may end up as a positive for luxury London property. During the 2008 Financial Crisis, investors swarmed to the capital to tie up their money in the relative security of its high-end homes. As the price of oil falls and China’s stock market becomes ever more unstable, these factors could rescue the city’s property market from its current slump.