U.K. Home Prices Seen Lower in 2015 on Vote Uncertainty

U.K. house prices will decline in 2015, led by a slump in London, as uncertainty over May’s general election and proposed property taxes tarnish the country’s image as a safe haven for foreign buyers.

Prices will fall by 0.6 percent nationwide and 3.3 percent in London, the Centre for Economics and Business Research said in an e-mailed report. That compares with an 8.8 percent rise in U.K. values and a 16.8 percent increase in the capital last year.

“The uncertainty surrounding May’s election, proposed changes to property taxation, and reduced foreign demand are already bringing down house prices,” CEBR economist Nina Skero said in the report. “Subdued price rises or modest declines also reflect a correction in the housing market after a period of very strong price growth.”

The U.K.’s housing market has slowed since July when Bank of England Governor Mark Carney introduced measures to limit riskier mortgages and prevent an unsustainable buildup of consumer debt. Demand for U.K. mortgages fell the most since 2008 in the fourth quarter, according to the BOE. U.K. house-prices rose at the slowest pace in more than a year in December, according to Nationwide Building Society.

London’s luxury-home prices were first to cool, after leading the U.K.’s housing boom since 2009. Prices in the city’s wealthiest districts, where values average 4 million pounds ($6 million), declined 1.3 percent during 2014, Savills Plc said in a separate report today.

“Sellers of prime housing need to maintain a realistic view on values achievable in the election year, if they are committed to achieving a sale,” Lucian Cook, head of residential research at Savills, said in the report.