Home values in Kensington & Chelsea and Westminster, London’s most expensive boroughs, fell in April as a strengthening pound and potential new taxes deter wealthy foreign buyers.
The average price paid for a home in Westminster, which includes Mayfair and St. James’s, fell 2.9 percent to 1.19 million pounds ($2 million), according to data compiled by Acadata Ltd. Values in the borough dropped 14 percent from a year earlier, the real estate research firm and LSL Property Services Plc said in a report today.
U.K. home prices have soared amid near record-low borrowing costs and a growing economy. Values in London’s best areas have led gains, jumping more than 70 percent since 2009 as political and economic turmoil overseas attracted cash-rich buyers and foreign investors seeking a haven, according to Knight Frank LLP. Today’s report showed prices fell in six of London’s 10 most expensive boroughs in April and the 0.2 percent monthly gain was the lowest in 10 months.
“We are seeing a cooling of the market in some London locations, even if the 13.3 percent annual increase in prices would be categorized as ‘high’ by most market commentators,” Acadata Chairman Peter Williams said in the report.
In Kensington & Chelsea, which includes the affluent Knightsbridge neighborhood, average values fell 2.7 percent in April to 1.9 million pounds. Over the year through April, values there rose about 31 percent, the third-highest gain by a London borough after Lambeth and Tower Hamlets.
Offering prices of homes valued at 10 million pounds or more “are being reduced by 10 percent to more reasonable levels right across central London,” David Adams, managing director at broker John Taylor, said in a June 11 statement. “The Europeans are concerned about the slight chance of a mansion tax should Labour be elected.”
A weakened pound following the financial crisis helped attract foreign buyers to London properties. The U.K. currency has risen 7.5 percent against a basket of international currencies in the last 12 months. It gained 17 percent against the Russian ruble.
Home values in England and Wales rose 8.5 percent to an average of 266,013 pounds in the 12 months through May, the biggest annual increase since August 2010 and the highest value on record, according to the report.
Williams, commenting on reports that price gains are weakening, said: “The slowdown in prices, if it exists, is currently limited to the top end of the market and in prime Central London only.”
(An earlier version of this story was corrected because the time period for England and Wales home price gains was misstated.)
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