Home-price gains in London’s most-expensive districts are trailing the rest of the city because buyers are deterred by high asking prices and the possibility of new taxes after next year’s national election.
Values in the 13 neighborhoods that Knight Frank LLP defines as prime central London rose 8.1 percent in the 12 months through June, the broker said in a report today. Home prices in the entire city jumped 26 percent in the second quarter from a year earlier, the biggest gain in 27 years, Nationwide Building Society said July 2.
Prime London districts such as Mayfair and Chelsea have risen by more than 70 percent since the last trough in 2009 as economic turmoil overseas and a weakened pound drew buyers. Chancellor of the Exchequer George Osborne will introduce a capital-gains tax on homes sold by people living abroad next year and the opposition Labour Party wants to implement an annual tax on homes worth more than 2 million pounds.
“We’ve had 44 months of growth and buyers at some stage have a pause for breath,” Tom Bill, head of London residential research at Knight Frank, said by phone.
Homes valued at less than 2 million pounds increased by about 14 percent in the 12 months through June, while those offered for 10 million pounds or more climbed 3.5 percent, according to the report.
The City of London financial district and its fringes, along with nearby Islington, were the best-performing districts with gains of 16 percent each, Knight Frank said. Homes in Belgravia rose 1 percent, the smallest increase among areas the report covered.
Contract exchanges for homes have fallen by almost 37 percent from a year ago and the number of new properties coming onto the market is down about 25 percent, according to the report. The number of new people interested in buying a home in London’s best districts has dropped more than 14 percent in a year, London-based Knight Frank said.
Rents in prime central London rose 0.9 percent in June, the highest monthly increase in more than three years, Knight Frank said in a separate report. Rents there are 0.4 percent below where they were a year earlier, the broker said.
The rental market is “likely to benefit from slowing demand in the sales market as buyers become more cautious over the pace of price growth and as uncertainty over the outcome of next May’s general election intensifies,” Bill wrote in the report.