London Luxury-Home Values Decline as Taxes Deter Wealthy Buyers

Home prices in central London’s wealthiest districts fell for a second quarter as buyers were deterred by higher taxes and uncertainty surrounding the U.K. general election in May.

Values fell 1.1 percent during the first quarter in districts including Notting Hill and Mayfair that Savills Plc defines as prime central London, the London-based broker said in a statement on Thursday. That extended a 4.2 percent decline in the previous three months.

London’s luxury-home market is running out of steam after outperforming the rest of the U.K. since 2009. Chancellor of the Exchequer George Osborne imposed changes to the stamp duty transaction tax in December so wealthy homeowners pay more. The opposition Labour Party plans to raise 1.2 billion pounds ($1.8 billion) from an annual tax on homes valued at more than 2 million pounds if it wins the election next year.

“While we believe the fundamentals of demand and supply remain sound, the short-term outlook for the prime property market is heavily dependent on the extent to which the election brings political certainty and whether the sector is subject to further taxation,” Lucian Cook, head of U.K. residential research at Savills, said in the statement.

Values declined 4.3 percent from a year earlier, according to the statement. Since December, buyers of a 5 million-pound ($7.8-million) home have paid 513,750 pounds in stamp duty. That’s almost 164,000 pounds more than previously, according to government data.

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