Prices in prime central London will fall by two percent this year and will see zero growth in 2016, according to the latest research by FTSE 250-listed real estate adviser Savills.
The adviser had previously predicted a one percent fall this year before an eight percent surge in 2016.
Last year’s stamp duty reform, which hiked charges for buyers of high-end property, was a “defining moment” for London’s property market, Savills said, especially as the market “was looking fairly fully priced”.
“It is fair to say that last year’s Autumn Statement took the market by surprise and has essentially prevented any bounceback in values post election, leaving little scope for significant value uplift next year, particularly in a low inflation environment,” said Lucian Cook, Savills head of residential research.
Prices in the most prestigious areas of the Capital, where the average house price in the Savills index is around £5 million, are currently 4.6 percent lower year-on-year, but by year-end the impact of the higher stamp duty will have been ‘largely absorbed’, Savills noted.
Furthermore, in the five-year period to 2020 prime central London prices will have grown 21.5 percent, as the fundamentals of wealth generation and demand are re-established, Savills predicted. This compares with an 18.2 percent price growth projection for other prime London locations.
“We expect the depth of the market and the maturity of London as a global city, coupled with job creation and economic growth forecasts to return to long term trend rates of real price growth, particularly, but by no means exclusively, in core prime central London locations,” Cook concluded.
In the meantime, more Londoners are likely to look to move further out “where their money will stretch to a larger property”, he added.
Earlier this month, online real estate agency eMoov said that the London commuter belt is the hottest property market in the UK, primarily because inflated prices in the inner boroughs pushed buyers outwards in a ‘ripple effect’. Westminster, Chelsea and Fulham were amongst the ‘coldest’ locations, eMoov noted.