House price falls in central London start to spread out across the capital - but how far?
03-27-2015
Wealthy homeowners in the upper tiers of London's housing market are seeing the value of their homes fall. Photo: ALAMY
By Anna White, Property correspondent
House price falls in the capital's more affluent central boroughs have started to spread across the rest of luxury London, after the upper eschelons of the housing market were hit by the Chancellor's radical stamp duty reform.
Property values in central London's top five to ten percent of the housing market, by value, fell 4.3pc in the 12 months to March 2015, while prices dropped 2.6pc in the popular South West London, including areas such as Clapham and Wandsworth.
Prices in all areas of luxury London, categorised as North West, South West, North and East of the City, fell in the first quarter of the year compared to the first three months of 2014, with luxury values to the east of the City seeing the biggest quarterly fall of 1.5pc, according to a new forecast from the property group, Savills.
Analysts across the industry have said the price falls in London's luxury market are temporary given huge overseas and domestic demand from wealthy families, high networth individuals, well-paid professionals and investors who all want to live or own in the capital.
Prices in London's polarised housing market (albeit "normally-priced" homes or mansions) soared before and after the property crash of 2008 with luxury values now 34pc above the last peak.
However, the cyclical correction which has now gripped the capital has been accentuated by George Osborne's stamp duty overhaul.
The surprise reform came in last December's Autumn Statement when the Government switched the system from a slab to progressive structure, saving money for 98pc of homeowners in England and Wales. But over the £1.5m mark the new regime is far more expensive than the old version.
This move has cooled the £2m to £5m market in particular, which has also been knocked by uncertainty surrounding the general election and potential introduction of mansion tax should Labour win.
“As we forecast in November, uncertainty regarding the general election and the potential for further taxation of high value property have contributed to a subdued market in the first part of 2015,” said Lucian Cook, head of UK residential research at Savills.
“The stamp duty changes came after five and a half years of sustained price growth for prime London property. This segment of the market is now looking fully taxed and sellers are having to factor in price adjustments equivalent to the stamp duty increase.”
By contrast, the softening in the London markets has corresponded with a pick up in the number of Londoners circling the country market. Prices of homes below the £2m threshold in the luxury regional markets outside the capital rose by 1.1pc in the first quarter of the year.
However, the market is still constrained by pre election caution.
“While we believe the fundamentals of demand and supply remain sound, the short term outlook for the prime property market is heavily dependent on the extent to which the election brings political certainty and whether the sector is subject to further taxation," said Mr Cook. "Certainty will allow buyers and sellers alike to take account of the impact of any fiscal change.”
However, any downturn will be short lived, the research revealed, with Savills forecasting that prices in the top end of the London market will rise by 23pc over the next five years if there is no further taxation of high value property.