Buy-to-let investors and second-home owners were behind three in five property purchases made in Prime London during Q1 2016, boosting the proportion of purchases made in cash, according to estate agent Marsh & Parsons’ latest London Property Monitor.
Accounting for 36% of all sales from January to March, buy-to-let investors were the most prolific type of buyer across Prime London in the three months immediately preceding the April 1st implementation of an additional 3% Stamp Duty. This represents a significant spike from 26% of purchases during the previous quarter, and a sudden reversal of the recent trend of weakening investor influence. Investor share of the market has been in slow decline last year since it peaked at 37% in Q4 2014.
Those purchasing an additional residence became the second most prominent type of buyer in Prime London during the first quarter of 2016. This buyer group saw an even bigger jump in market share quarter-on-quarter, with second-home owners accounting for nearly a quarter (23%) of all Q1 property purchases, up from just 14% in Q4 2015.
Together, buy-to-let investors and second-home owners accounted for three-fifths (59%) of all purchases in Prime London during Q1. In Prime Central London, this figure was even higher – reaching three-quarters (76%).
Second-home owners overtook investors as the most common type of buyer witnessed in Prime Central London during Q1. The majority (41%) of all property purchases in Prime Central London were made by those buying an additional residence, a significant leap from 24% in Q4 2015. Property investors also seeking to circumvent the extra 3% levy accounted for a further 35% of property sales.
This preponderance of second-home owners and buy-to-let investors has translated into a much higher proportion of cash purchases in Prime London. Two-fifths (40%) of property purchases were made by cash buyers in Q1, an increase from 34% in Q4 2015, and 36% a year ago. In Prime Central areas, this rose to almost half (46%).
David Brown, CEO of Marsh & Parsons, comments: “Investors will always be the stalwarts of the Prime London property market – it’s the golden goose of capital returns, and people are still clamouring for a slice of the action. But second-home owners really jumped to it this spring too, and were much more prominent in the market than we would typically expect. But this was by no means a typical quarter. Sales activity in the opening three months of this year has been exceptionally skewed by the additional layer of Stamp Duty for both buy-to-let and second-home purchases. Naturally, the knee-jerk reaction among these groups has been to hurry through property purchases before the deadline, and make savings while they can. Now that the ruckus has passed, we’ll see much more orderly transactions over the summer months, as the market rebalances towards first-time buyers and other owner-occupiers for whom it will just be business as usual.”