London’s high-end house prices fell further at the beginning of this year, as the possibility of a Brexit and uncertainty surrounding the global economy put off would-be buyers from taking the plunge.
In the most expensive areas of central London — including Knightsbridge, Chelsea and Belgravia — average prices fell by 0.8% in the first quarter of the year, according to real estate adviser Savills. This left values at the very top end of the market 6.7% below their 2014 peak.
As well as concerns over the economy and June’s referendum on membership of the European Union, hefty sales taxes — known as a stamp duty in the U.K. — are also weighing on demand among international buyers in particular.
Stamp duty rates for buyers of expensive homes in the U.K. were increased by the government in December 2014; an additional 3% surcharge will be slapped on buyers of second homes and rental properties effective Friday, April 1.
The Financial Times reports that buyers are rushing to close sales by March 31 to avoid this unpopular tax. Currently, the purchase of a £2 million ($2.88 million) second home or rental property is taxed £153,750, or about $221,000; after midnight on Thursday, that stamp duty will rise to £213,750, or about $307,000.
This week’s rushed sales notwithstanding, Savills doesn’t expect any price hikes in London’s luxury home market for the year as it is widely predicted that there will be a dip in the number of these buyers once the surcharge is introduced.
Lucian Cook, head of UK residential research at Savills, said, “Given historic levels of price growth, the increased tax burden and political uncertainty stemming from the pending mayoral election and EU referendum, our view is that we are unlikely to see any price growth over the course of 2016 as the market continues its adjustment.”