Homes worth more than 2 million pounds ($3.4 million) in central London’s best districts fell in value in the second quarter in the latest signs of cooling in the U.K. capital’s luxury-home market.
Houses and apartments selling for more than 10 million pounds declined by 1.5 percent from the previous quarter and residences valued from 5 million to 10 million pounds dropped 1.8 percent, according to data compiled by broker Savills Plc. Homes valued from 2 million pounds to 5 million pounds fell 0.1 percent.
Prime London neighborhoods like St. James’s and Knightsbridge saw gains of more than 70 percent since the last trough in 2009 as a weakened pound and economic turmoil overseas drew buyers. Chancellor of the Exchequer George Osborne is adding a capital-gains tax next year on homes sold by people living abroad after raising a transaction tax to 7 percent from 5 percent for properties priced at more than 2 million pounds in 2012.
The “market has looked fully priced, particularly given transaction costs” after the tax changes, Lucian Cook, Savills’s head of U.K. residential research, said by e-mail. A stronger pound and the risk of further taxation are also affecting values, he said.
Both the Liberal Democrats and opposition Labour party support an annual levy on homes costing more than 2 million pounds.
Still, the number of homes in central London that sold for 5 million pounds or more reached a record of almost 160 in the second quarter, Savills said. The previous record was 140 in the final three months of 2013.
Prices in the upscale Mayfair neighborhood fell 0.1 percent to 2,320 pounds a square foot from the previous quarter and have now gained 8.9 percent in the 12 months through June, Savills said. Marylebone was the best performing of eight central London districts ranked by the broker after values gained 3.5 percent to 1,620 pounds a square foot in the three months through June.
The value of homes in central London’s best districts rose 7.6 percent in the 12 months through June and are 40 percent higher than their peak before the 2008 financial crisis, according to the London-based broker.