Knight Frank Prime Central London Index: November 2012 results.
• Annual growth is now 9.4%
• Prime central London residential stock in November was 47% higher than in the same month in 2011
• Stamp Duty increase has impacted on the market, exchange volumes in the £2m-£5m bracket are down 44% year-on-year
Draft legislation regarding changes to the current capital gains tax regime and the introduction of new rules for an annual charge on £2m+ properties held in certain ownership structures is due to be published on December 11th. Ahead of this Liam Bailey, head of Knight Frank Residential Research, assesses the impact that tax changes have had on the prime central London market.
“Despite a rise in the number of properties coming to market, exchange volumes remain subdued, especially at the top end of the market.
“Following an increase in stamp duty for homes valued over £2m in March this year, an air of uncertainty among buyers has greeted the prospect of a new capital gains tax regime and an annual charge on residential properties valued over £2m owned through a company structure.
“This element of ‘wait and see’ in the market from potential homeowners has resulted in a significant rise in prime central London residential stock which now stands 47% higher than in November 2011.
“Prime central London property prices rose by 0.4% in November, bringing the total price growth in the sector over the preceding 12 months to 9.4%. While prices in a number of prime central London postcodes remained flat over the month both Notting Hill and Chelsea reported declines of 0.7% and 0.4% respectively, reinforcing our view that the market will moderate in 2013.
“As individuals hold off making decisions, exchange volumes remain subdued and sales of £2m+ homes were down 33% year-on-year in the third quarter. Within this, the £2m-£5m bracket has been hit the hardest with volumes down 44% over the same period.
“The volume of new applicants, while still lower than a year ago, has not slipped quite as strongly which suggests there is some evidence for the claim that some buyers are waiting for the December 11th draft legislation to be published before committing.
“Over the year-to-date, price growth has been driven by the sub-£2m market where, since changes to stamp duty were enacted in the budget, exchange volumes have been higher than in 2011 adding further weight to the idea that at the top end of the market uncertainty caused by the tax changes has resulted in indecision among buyers.
“The government has already increased stamp duty to 7% for people buying property over £2 million in their own name and 15% for companies. It also revealed plans, to be confirmed next month, to impose an annual charge of up to £140,000 per annum on properties held by these companies as well as a new capital gains tax on their sale.”
