London Luxury Home Prices Rise at Slowest Rate Since 2010

on Nov 30, 2012
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**0.4% Price Gain – Smallest in Over Two Years**

Bloomberg reported on 30 November 2012, citing an index compiled by real estate consultancy firm Knight Frank, that this month, prices of luxury homes in central London rose by their lowest margin in over two years as investors delayed purchases ahead of possible implementation of new property taxes.
Knight Frank, which compiles the Prime Central London Index from its own appraisal values of a sample of properties in the 13 most expensive central London boroughs, such as Knightsbridge, St. John’s Wood and Belgravia, reported a slower advance rate of residential property prices in these areas. According to the London-based real estate broker, in November, the average price of a house or apartment in the UK capital’s most expensive neighbourhoods gained 0.4 per cent – the smallest increase since October 2010, when prices declined 0.2 per cent.

**Investors Concerned Ahead of Possible Property Taxes**
The drop-off in price rises for luxury London homes comes six months after Chancellor of the Exchequer George Osborne raised stamp duty on sales of houses worth £2 million and above from 5 to 7 per cent, and to 15 per cent on properties purchased through corporate vehicles. When in April Chancellor Osborne announced the changes to property taxation, he also indicated that in his Autumn Statement, which is scheduled for December 5th, he may introduce further levies on luxury homes and may charge capital gains tax on the sale of such properties by non-residents who are not naturalised, as the UK government is weighing an annual charge of as much as £140,000 on real estate assets owned by offshore companies.

!m[st johns wood metro station](/uploads/story/940/thumbs/pic1_inline.png)The uncertainty over the additional measures that may be coming next week has somewhat of a deterrent for overseas buyers, who make up the bulk of transactions in the high-end housing market in the priciest inner-London boroughs. According to real estate agents, many foreign investors have stayed away from the market during the past six months, while some buyers have completed deals at just under £2 million in order to avoid incurring the higher tax introduced in April.

**Sales Decline, But Analysts See Prices Little Changed in 2013**
Knight Frank’s global head of residential research, Liam Bailey, said: “An air of uncertainty among buyers has greeted the prospect of a new capital-gains tax regime and an annual charge. This element of ’wait and see’ in the market from potential homeowners has resulted in a significant rise in prime central London residential stock.”

The real estate consultancy also said that the number of homes available for sale in areas like Knightsbridge and Chelsea is about 47 per cent higher than a year ago. According to Knight Frank, in the third quarter of the year, sales of properties valued at more than £2 million dropped by a third compared to the same period in 2011. Yet, Knight Frank, as well as other leading UK real estate consultancy firms like Savills and Jones Lang LaSalle, forecast that prime central London home prices will be little changed in 2013.

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