Central London house prices are now more than 13% higher than the previous market peak in early 2008, but stamp duty and the uncertainty surrounding proposed tax changes for houses worth more than £2m have started to weigh on the market.
According to Knight Frank, the central London property market retained its dominance in July, with a 0.5% increase in average prices taking the value of prime property to a new record high.
But the pace of price growth has slowed in recent months, and July’s 0.5% increase is the most modest monthly rise since October 2010.
The world may be focusing on London during the Olympics, but the eurozone turmoil is still rumbling on, with Spain becoming the latest country to feel the pressure, said Knight Frank.
London remains a key destination for investors looking for ‘safe-haven’ assets, a fact reflected in the continued rise in interest from prospective buyers, up 23% in the three months to July compared with the previous quarter.
But the stamp duty rises and proposed property tax changes announced in the March Budget are having an impact on the market. And the ongoing consultation on the annual charges and capital gains tax that will be levied on property worth more than £2m held in company structures is creating uncertainty. A final decision on the consultation will be announced in this year’s pre-Budget report or next year’s Budget.
The impact of this market ambivalence can be seen in price movements, with the sub-£2m market performing most strongly in recent months.
Activity data, another key market indicator, shows a slowdown in the three months to the end of July. Total exchanges across the whole prime market between May and July were 11% lower than in the same period last year.
But while sales of properties worth between £2m and £10m fell by 23%, exchanges of houses worth £10m or more rose by nearly 30%.
