Political uncertainty continues to weigh on London’s luxury residential market, with prime home values falling in the second quarter, according to a report Wednesday from property adviser Savills.
Average prime values in the British capital and its posh outer areas fell 0.9% in the second quarter, with a total decline from the second quarter last year of 5.3%, according to the report. Savills defines prime neighborhoods in central London as those with an average home value of at least £4 million (US$5.171 million), and outside the city center as those with an average home value of £2 million (US$2.585 million).
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Luxury home values fell slightly more in Central London, which logged a 1.3% decline in the second quarter, bringing the yearly decline to 6.8%.
Prime home values in London boomed during the recovery from the global financial crisis and peaked in 2014. But a new stamp duty, or tax on home purchases, rolled out in the latter half of that year hit the luxury market particularly hard, a decline the vote to leave the European Union in 2016 has exacerbated further, according to Savills.
"Increased political and economic uncertainty has weakened fragile buyer sentiment," said Lucian Cook, head of residential research at Savills, in the second-quarter report.
Average values in prime central London have fallen a total of 14.4% since their 2014 peak.
The city’s financial sector has shown noticeable caution in the wake of Brexit when it comes to home buying. Popular residential areas for these workers, such as Kensington, Notting Hill and Canary Wharf, have seen dips in home values.
Savills had previously forecast that home values would be flat in 2017, but given the decline in the first half of the year, the firm has reassessed its outlook. Prime home values are unlikely to recover by the end of the year, the report said.
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Sellers may need to reassess their expectations if they want to find a buyer in the current market, Mr. Cook said.
"Where vendors have realistic price expectations, which reflect these falls, sales are proceeding," he said. "But there is a lack of urgency in the market and vendors who need to sell may need to adjust their expectations further."