Prices in the upper echelons of the property market in the core of the capital will fall this year by 2pc due to the impact of the Chancellor's stamp duty changes made last December, research has suggested.
But after a quiet 2015 and 2016, annual house price growth will start to accelerate, according to the latest Savills' Prime London Index.
The index defines "luxury London" as boroughs where the average house price is more than £5m.
"Stamp duty reform, very low inflation and the mortgage market review will continue to moderate London’s prime housing markets over the short term, but the fundamentals of wealth generation and demand point to steady medium-term price growth," said Lucian Cook, head of residential research for Savills.
House price growth in luxury London - central v outer
| Central | Outer | |
|---|---|---|
| 2015 | -2 | 2 |
| 2016 | 0 | 2 |
| 2017 | 2 | 2 |
| 2018 | 5 | 4 |
| 2019 | 6.5 | 4 |
| 2020 | 6.5 | 5 |
The luxury market - where the average house prices is over £5m
Data: Savills
Other luxury London locations outside the centre, such as Highgate or Wimbledon are less affected by the change in stamp duty and therefore Savills predicts a 2pc rise in prices 2016, compared with no growth in the central areas.
Adam Challis, head of research at rival property company, JLL, said that another house price bounce is possible as there was nothing looming on the horizon to knock the market - such as the general election earlier this year.
"The threat of Labour [and mansion tax] has now disappeared," he said.
"There is a lack of supply at the top end and as long as the world's elite want to live in London, prices will continue to rise."
Map: the price per square foot in the different pockets of luxury across London
Data: Savills