The London housing market will cool next year as a proposed tax on property sales limits demand from overseas buyers, Rightmove Plc (RMV) said.
Asking prices in the capital will increase 6 percent after gaining 10.6 percent in 2013, the U.K.’s biggest property website said in a report published today. Prices nationally will rise 8 percent, up from 5.4 percent this year.
Chancellor of the Exchequer George Osborne plans to introduce a capital-gains tax on non-resident foreigners selling U.K. property, starting in 2015. He denied last week that government incentives to boost the housing market are fueling a bubble and pushing prices further beyond the reach of first-time buyers.
“Upwards price pressure remains but will show some signs of waning,” Miles Shipside, commercial director at Rightmove, said in a statement. The planned tax will “take some gloss off overseas speculators’ future profits.”
In London, prices fell 0.7 percent in December from the previous month, Rightmove said. The biggest losses were in Kensington and Chelsea, which fell 4.1 percent, and Haringey, which dropped 3.7 percent. Camden was the biggest gainer, with a 2 percent increase.
Values are being supported by a supply shortage, with 80,000 fewer properties listed in 2013 than in 2007, Rightmove said.
Asking prices across England and Wales were down 1.9 percent this month, led by a 2.7 percent drop in the East Midlands and southeast England. All 10 regions tracked by Rightmove showed monthly declines.
Osborne announced the new capital-gains tax on Dec. 5, saying it will apply to “future gains” after it goes into effect in April 2015. He didn’t specify the size of the levy. Capital-gains tax rates for second homes of U.K. residents currently range from 18 percent to 28 percent.
Bank of England Chief Economist Spencer Dale said last week that officials were “fully aware” of risks posed to the U.K. economy by an overheating housing market and had tools to prevent damage to the economy. Governor Mark Carney has announced measures to cool the property market while keeping the key interest rate at a record low to nurture the broader recovery.
“With mortgages still historically cheap and interest rates set to remain stable, if you’ve been putting off a good reason to up sticks, it could be opportune to make 2014 the year to move,” Shipside said.
To contact the reporter on this story: Jennifer Ryan in London at email@example.com
To contact the editor responsible for this story: Craig Stirling at firstname.lastname@example.org