The luxury London property market finally appears to be in pause mode, and it could stay stuck for a while, as extra costs are piled on to the cost of buying a top-notch home according to high-end estate agent Knight Frank.
The hike in the cost of buying homes at the top end of the market has "just stalled the market" in Hong Kong and Singapore, Alistair Elliott, chairman of Knight Frank, told CNBC. Similarly, stamp duty increases in the U.K. are "leading to a more stagnant market at the top end", he added. In Asia-Pacific, Knight Frank's offices have seen some cooling-off as countries outside China were affected by its slowing economic growth, and property cooling measures took effect.
This comes after a period where prices at the top of the market in London soared by double digits close to every year, thanks to increased investment from overseas buyers as well as domestic money.
Knight Frank on Monday reported a 19 percent rise in pre-tax profits to £162 million for the year to March 31, with sales up by 13pc to £443.1 million for the same period.
"There was bound to be a period of cooling, and I don't think that's necessarily a bad thing," Elliott said.
"The fundamental issue in the mid-term is supply, and the Stamp Duty at one end is not going to increase supply at the other. We've got to introduce more affordable homes. The only way this is going to be addressed properly is by more government influence."
George Osborne, the U.K.'s Chancellor of the Exchequer, pledged to free up the rules on developing "brownfield" (land which has previously been used for industry) sites for residential use on Monday. Politicians across the political spectrum have been promising to build more homes in the U.K. for years to little effect – although this did not stop the share prices of housebuilders like Barratt and Taylor Wimpey rising in Monday trading.
Caution has also crept in as the era of cheap money, fuelled by quantitative easing programs on both sides of the Atlantic and record low interest rates, appears to be drawing to a close.
"There has been a massive build-up of investment capital, and increasingly that capital has seen property as its right home," Elliott said.
He acknowledged that the level of foreign buyer interest in London residential property had calmed down.
"Where there is strife, the first thing we see is there is a flight of capital to safe havens. The mid-term is likely to be that people slow down," Elliott said.
- By CNBC's Catherine Boyle