London’s best homes have risen in value for more than three years but uncertainty over regulation and future tax changes has curbed the rate of growth. The most recent example is a proposal to charge foreign buyers capital gains tax on UK homes, which the government could announce next month.
Monthly growth has been less than 1% for 18 months, the longest such period in more than eight years. Annual price growth was 6.9% in the year to November, which compares to 9.5% in the year to November 2012 and 12.6% in the previous year.
Slowing growth in London’s most affluent postcodes is in stark contrast to the outer ring of London beyond prime central London, where government incentives and nascent economic bullishness are sparking growth to such an extent that fears of a price bubble are dominating newspaper headlines.
This split is underlined in Knight Frank’s most recent forecasts. Growth in prime central London is expected to slow to 4% next year, hit zero in 2015 before turning positive again to produce cumulative growth of 20% in the four years to 2018.
Over the same period, prime outer London is expected to see positive growth every year, showing a cumulative rise of 23% between 2014 and 2018.
This role reversal between prime central London and the rest of London means sellers’ expectations have to be increasingly realistic, particularly in the £10 million+ super-prime bracket, where prices were flat in November.
Prices in Mayfair, Belgravia and Kensington were unchanged in November, while they were down 0.1% in Chelsea. The strongest growth was in the sub-£2m market, where prices have grown 11% this year, driven in part by the higher stamp duty charge for £2m+ properties introduced at last year’s Budget.
With many would be vendors sitting on their hands in the belief they are in a fast-rising market, stock levels are lower by almost a third at the end of November versus the same period in 2012.
Demand nevertheless remains strong, with new applicants in the year to date up 29% compared to the previous year.
