High-End London Property Prices Falter on Budget Worries
Staff Writer, CNBC.com
Prime Central London property had looked almost immune to economic problems in the rest of the U.K and the euro zone in the past couple of years.
This could be changing.
In July, prices for properties over 2 million pounds ($3 million) in areas like Chelsea and Mayfair grew by 0.5 percent — the lowest rate of growth in almost two years — according to estate agents Knight Frank.
This came despite plenty of interest from buyers elsewhere in the euro zone looking for safe havens. Interest from prospective buyersrose by 23 percent in the three months to July compared to the previous quarter, according to Knight Frank.
And internet searches for London property rose by 9 percent from Italy, 10 percent from Spain and 50 percent from Greece in May, according to Savills.
“It is developments closer to home which are preoccupying those in the market, namely the stamp duty rises and proposed property tax changes announced during the Budget in March,” Liam Bailey, head of residential research at Knight Frank, wrote in a research note.
He warned of “emerging evidence” that new measures proposed in March’s Budget, including annual charges and tax on property worth more than 2 million pounds held in company structures, are putting off buyers and causing uncertainty in the market.
The measures are aimed at closing a tax loophole which allows owners of these properties to avoid some taxes by putting the ownership under a company name.
“Activity is starting to recede from record heights seen over the last year or two, to a more moderate pace, indicating that price growth may also slow over the coming months,” Bailey said.