The new trend: Why are Londoners turning to smaller properties?

 
The new trend: Why are Londoners turning to smaller properties?

In recent years, the London property market has been all about becoming bigger and better, with sales of larger properties costing more than £1 million rising time and again. 

However, according to new reports, the tide is turning, and a new trend is making its way into the capital's market, particularly prime Central London. 

W.A. Ellis' latest findings have shown that, for a variety of reasons, sales of homes costing less than £2 million have been thriving. In the SW3, SW7, SW10 and W8 postcode areas alone, transactions surrounding homes below this threshold have increased by 49 per cent.

At the same time, the number of purchases of houses costing between £5 million and £7 million have had less of a strong period, with many downsizing from these properties. 

The reasons for this changing sentiment among buyers and such a seismic shift in trends are both financial and political. 

On one hand, stamp duty thresholds come into play for buyers. For example, a property that costs £2 million is subject to stamp duty of five per cent, costing the buyer £100,000. Those which cost just a pound more, however, would come with a levy of seven per cent, or more than £140,000.

This additional charge, according to W.A. Ellis, means that more people are aiming to buy smaller properties.

On top of this, there is also the political uncertainty that comes in the year before any general election. Many owners in London are aware of the Labour party's intention to introduce a mansion tax and are downsizing as a way to make sure they are not subject to this extra charge. 

Although the latter is a reality that could reverse based on the results of next year's election, it is very much causing a change in the way buyers react at the current time. 

But is this a trend that is likely to continue into the future? If developers are to be believed then it definitely will be the case. 

It's not all about the political standpoint of the property market, after all. There are now more one, two and three-bedroom flats being built than houses in the capital.

It all comes down to demand, of course, and with business sentiment riding high on the back of predictions for growth of more than 2.8 per cent from the Business Chamber of Commerce, it's highly likely that many young professionals will be moving into the capital and snapping up these smaller properties as employment opportunities improve.