No Respite in Sight for London’s Luxury-Homes Market in 2017By and
Prime central homes sales dropped about 24% last year
Sellers had to accept price cuts of 10% to secure deals
If 2016 was a tough year for London’s luxury property market, 2017 may not provide any respite.
Values for prime properties in the U.K. capital were pummeled this year as higher sales taxes and uncertainty surrounding the country’s exit from the European Union forced sellers to accept an average discount of 10 percent in order to achieve sales, according to data compiled by researcher LonRes. That compares with 4 percent in 2013. The market will remain subdued next year as relief on mortgage interest is reduced, capital-gains tax increases and new rules regarding inheritance tax deter buyers.
“If buyers were facing increased stamp duty on the way in, they are now asking themselves what they will be facing in terms of capital-gains tax and inheritance tax on the way out,” Marcus Dixon, head of research at LonRes, said by phone. “Next year may mark a couple more percentage points off prices, but it’s transaction volumes that will really be further suppressed.”
Despite a 39 percent surge in transactions in March, when buyers rushed to purchase homes before extra stamp duty levies were enforced the following month, the number of prime central properties sold in 2016 dropped 24 percent from a year earlier, the data shows.
Prices reached a low of at least 22 months in September and are now 6.9 percent below the November 2014 peak after a small rebound in the fourth quarter, the data shows. The average price per square foot is now 1,787 pounds ($2,208).
“Buyers were expecting prices to fall considerably more after Brexit; hence they were offering considerably less because nobody wanted to catch a falling knife,” Dixon said. “However, some now think prices have bottomed out and see it as a good time to get back in the market." He said the uptick that resulted from the change in sentiment isn’t expected to continue next year, and prices will be little changed.