House prices in London’s most expensive neighborhoods fell by the biggest amount in almost seven years after it emerged that Britain will leave the European Union.
Annual price growth in prime central London fell 1.5% in July, according to new research by Knight Frank, the global real estate consultancy, released Wednesday. While this was the biggest drop since October 2009, the headline figure masked even bigger falls in certain neighborhoods.
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With a fall of 7.3%, Knightsbridge, home of the famous department store Harrods, witnessed the biggest price drop in prime central London over the last 12 months. This was the largest decline in Knightsbridge in seven years and was followed by Chelsea and South Kensington, with drops of 7.2% and 5.7% respectively.
Knight Frank believes that even before the Brexit vote, sellers were starting to be more realistic on pricing, thanks to the unpopular stamp duty increases dampening demand especially among foreign buyers. But the vote, which took place on June 23, has encouraged vendors to show increased flexibility.
“Despite the widespread media coverage devoted to the EU referendum and its potential impact on house prices, the primary factor curbing demand in prime central London remains stamp duty,” said Tom Bill, head of London residential research at Knight Frank.
The British government first slapped higher stamp duty rates on more expensive homes in December 2014, before introducing a 3% surcharge for buyers of second homes and rental properties this past April.
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“The result of this two-year slowdown is that vendors had already begun to adapt to the new pricing environment and in many cases Brexit has been a trigger to make overdue reductions to asking prices,” Mr. Bill added.
“Since the vote, a number of buyers have requested discounts due to the climate of political and economic uncertainty. However, where the asking price was set at an appropriate level before the vote, deals are proceeding with no reductions,” he said.
A separate report from Knight Frank showed that rental values in prime central London fell 3.6% in the year to July due to higher stock levels and a degree of uncertainty surrounding the E.U. referendum result.