Luxury homes in prime central London, worth between £1m and £2m, have seen a drop in price of 20pc over the past year, as buyers are deterred by the talk of Mansion Tax and the impending general election.
New data from high end estate agent, Strutt & Parker, have shown that those properties in the £2m to £5m bracket, therefore over the £2m Mansion Tax threshold, fell by 27pc for the third quarter of this year compared with July to September in 2013, as the market dramatically corrects.
Exclusive homes worth more than £5m in prime central London - defined as Knightsbridge, Belgravia, Chelsea, South Kensington, Fulham, West Chelsea, Kensington and Notting Hill - performed slightly better with a decline of 15.2pc. This shows that super high networth individuals are less concerned about talk from Labour and the Liberal Democrats of a new tax on wealthy householders.
A similar pattern emerged in terms of volume sales, which were down 26.8pc overall, with all price bands seeing a reduction in the number of transactions.
“Whilst total values transacted in central London are markedly down on this time last year, we must have a sense of perspective and accept that 2013 was an exceptional year. It is really not surprising that prices are stabilising after the dramatic price increases we saw over the past 12 months," said Stephanie McMahon, head of research at Strutt & Parker.
“Sales volumes are also showing a slowdown and two quarters of data do suggest a trend of decline...We have seen these conditions before in the run up to a general election when speculation mounts."
Mansion Tax proposals have re-emerged this week following more details from Ed Balls.
The shadow chancellor said middle-class families will be barred from deferring Labour's mansion tax if they earn more than £42,000.
Higher rate taxpayers who own properties worth more than £2m will have to pay the tax immediately.
Only those earning less than £42,000 will be able to defer the payment until they sell the property or transfer ownership.
This tax proposals have faced criticism from the property industry.
Real estate group, JLL, released a statement that said: "Valuation of properties will be borne by the owner once every five years, unnecessarily increasing costs for thousands of homeowners at or near the £2m threshold."
"It imposes a significant ongoing cost to high-value property owners, many of whom will be on relatively modest incomes and/ or pensions."
The firm also said that it would chase high earners and investors out of the UK.