London Luxury-Home Price Gains Slow After Sale-Tax Increase
Luxury-home prices in central London rose at the slowest rate in 21 months in July as buyers were deterred by an increase in sales tax and the possible elimination of a loophole for offshore corporations, Knight Frank LLP said.
The average value of a house or apartment in the city’s most expensive central neighborhoods climbed 0.5 percent from June, according to an index compiled by the London-based broker. That reduced the annual increase to 10.3 percent from 10.5 percent in June, a one-year low.
Chancellor of the Exchequer George Osborne raised sales tax for properties valued at more than 2 million pounds ($3.1 million) to 7 percent from 5 percent starting in April. The government is also considering whether to impose a sales tax as high as 15 percent on homes bought by offshore companies, which currently escape the levy.
The possibility of the new charge “is creating uncertainty and causing some would-be buyers and sellers to adopt a wait- and-see attitude,” Liam Bailey, Knight Frank’s head of residential research, said today in a statement.
Values have risen 49 percent to a record since March 2009, the low point for London’s prime residential market after the credit crisis. Overseas investors in particular have used real estate in central London as a haven from economic, financial and political upheaval at home, particularly those in the euro region and the Middle East.
Price gains may slow further in coming months, said Bailey. On an annual basis, values in central London have risen at a slower rate in each of the past eight months. Bailey expects an increase of 5 percent this year.
Knight Frank compiles its luxury-homes index from its own appraisal values of a sample of properties in the 13 most expensive central London neighborhoods, such as Belgravia, Kensington and Knightsbridge.
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