Luxury-home prices in central London rose at their fastest rate in three months in September, powered by demand for properties that escape a new higher rate of sales tax, Knight Frank LLP said.
The average value of a house or apartment in the U.K. capital’s most expensive neighborhoods climbed 0.7 percent from August, according to an index compiled by the London-based broker. The annual increase was 10 percent compared with a 13-month low of 9.9 percent in August.
Chancellor of the Exchequer George Osborne raised sales tax for properties valued at more than 2 million pounds ($3.3 million) to 7 percent from 5 percent starting in April. The number of luxury homes sold that weren’t subject to the higher levy rose by 23 percent in the third quarter from a year earlier. That lifted prices in the bracket by about 12 percent, Knight Frank said.
“London’s market performance continues to be aided by overseas buyers, who account for more than 50 percent of buyers in the 2 million-pound-plus market,” Liam Bailey, Knight Frank’s head of residential research, said in a statement.
Deputy Prime Minister Nick Clegg said today that the government can raise more money from the top 10 percent of earners through further levies on the most expensive real-estate purchases. Clegg’s Liberal Democrat party governs the U.K. in a coalition with the Conservative Party.
“Most people in this country don’t understand why people who have very high-value property don’t pay their fair share,” he said in an interview on BBC Radio 5 today. “It’s easier to stop tax avoidance on bricks and mortar than on money you can move around the world.”
The value of homes in the Chelsea neighborhood gained 10.5 percent in the year through June, according to London-based Savills Plc. That’s the most of any neighborhood, said Lucian Cook, the broker’s director of research, in an e-mailed statement.
“Together with South Kensington, it benefitted from interest from French buyers in a flight from euro-zone woes and the threat of punitive taxes at home, giving a real boost to the best addresses,” Cook said.
Russian, Indian, Italian, U.S. and French nationals were the biggest buyers from overseas, Knight Frank said. Foreign buyers accounted for 41 percent of prime London homes purchased for 1 million pounds or more.
Values have risen 51 percent to a record since March 2009, the low point for London’s prime residential market after the financial crisis, according to the report.
Knight Frank compiles the index from its own appraisal values of a sample of properties in the 13 most expensive central London neighborhoods, such as Belgravia, Mayfair, Kensington and Knightsbridge.