Demand for £1-million-pound houses in central London is plunging.
According to Knight Frank’s October survey of the market, there are 30% fewer buyers for prime housing in the UK’s capital.
Knight Frank said that demand was hit by a hike in stamp duty 11 months ago. The group added that dwindling demand hasn’t been helped by the slump in commodity prices and China’s slowing economy.
There’s a stand-off between buyers and sellers, Knight Frank said, as they argue over prices.
“Buyers calculate it will take them longer to recover the extra stamp duty expense in house price inflation and expect a lower asking price, something vendors are not always willing to concede,” Tom Bill, head of London residential research said in the report.
Chancellor of the Exchequer George Osborne changed the levels of stamp duty, a tax based on the value of the house when you buy it, at the start of the year. Rates for a house worth between £925,001 and £1.5 million were hiked to 10%, making it more expensive to buy a prime house.
Meanwhile, the slump in emerging market economies such as China and the fall in oil and commodities prices mean there are fewer wealthy buyers from abroad looking to invest in the London market.
There are five stats from the study which highlight just how demand for prime locations in central London has dropped this year:
- The number of exchanges in the three months to September 2015 was 17% lower than the same period last year.
- The number of new prospective buyers was -30% down on the same period in 2014.
- Knight Frank has revised down its 2016 forecast for prime central London price growth to 2% from 4.5%.
- Prices fell in October by -0.3%, which was the largest decline since the summer of 2010, a period when the euro zone crisis began to escalate following the original bailout of Greece.
- Annual growth dipped to 1%, which was the lowest level since October 2009.
Here is also a great map that shows how it’s the exclusive areas of Kensington and Chelsea that have been worst hit by the drop in demand for prime housing:
This trend is unlikely to reverse any time soon. Deutsche Bank called the top of London’s crazily hot property market in October, with Sahil Mahtani saying that “London’s property is unlikely to enjoy the next thirty years as it did the last.”
Add in the lack of certainty over the outcome of Britain’s upcoming referendum on EU membership — which could further put off foreign buyers — and you have the conditions for a weaker prime market for longer.
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