As the year 2016 ends and people welcome the New Year with tremendous enthusiasm; isn’t it the right time to have a retrospective analysis of what did happen in the London property market last year?

Look at the charts of the price ratio between the properties of London and out of London. The gap is far wider than what people expected. In fact, it is historical high. It means that selling a huge house in the Home Counties returned money that was hardly sufficient to buy a small apartment in London.

Fall in the number of transactions was significant in high-value properties and low-value properties both. The fall in absolute price was between 10 to 30 percent depending on the locality and facilities.

Thus, it was a peculiar year when both prices and transactions dropped, but uniformly in the city of London and outskirts.

Tax was the culprit

Yes, when you deep dive into the problem to find out what caused the problem, the tax is the main contributor. The surcharge introduced on buy-to-let investment and second homes that levied three percentage points on and above the stamp duty created a huge difference. As the amount was quite high on costly houses, people preferred investing in other safe heaven escapes rather than London.

The year 2017 looks no better

It seems that the year 2017 will also keep the story continue. The decision of raising stamp duty seems to be a failure. It didn’t increase revenues but slowed down the market momentum. Many property experts feel that the drop in the property prices would spread in other areas as well. Not only Central London, but other places will also face the turmoil.

Even today if you look at the prices across the country, not just within London, then they are quite overstretched. Experts say that they are in fact, below than 2007 levels if you talk in the absolute terms. In the northern part or Ireland, they are 40 percent down. How can one find cheerful sellers (or brokers) around?

Rising interest rates would bring the prices down

As of now, the property rates outside London are not remarkably high. However, some of the experts feel that tax rates, increased interest rates, and loan restrictions will not allow them to go further high. In fact, they suspect a possible drop in the prices due to the cumulative effect. Buy-to-let lending may show a marginal increase in the coming months.

Let’s hope for the best

Looking at the situation, the property market in 2017 will not show a significant drift. However, global and local aspects will certainly put a positive impact. Therefore, we can expect a better time in the second half of the year at least.

For those who want to invest in the London property market (or in the UK property market per se) shouldn’t do it with the objective of making a capital gain. The market won’t be as lucrative. However, a reasonable movement can be expected.