Sales of London mansions stall
Published 11/06/2015 | 02:30
A predicted rebound in the UK market for luxury-homes has failed to materialise following the May general election, as buyers push back against record prices.
"For some vendors, the champagne has perhaps gone to their heads," said Camilla Dell, managing partner at broker Black Brick Property Solutions. "They want to stick to their asking prices now and in some instances they're actually putting their prices up."
Realtors across the British capital saluted the Conservative Party's May 8 victory because it spelled an end to plans for a mansion tax and rent controls proposed by the losing Labour Party. Nathalie Hirst, an independent buying agent, predicted a "wall of money" would flood the luxury-home market.
That money isn't being spent as buyers, already discouraged by years of tax increases, balk at some valuations. Home prices in London's priciest districts climbed 2.3pc in May from a year earlier, according to a report last week by broker Knight Frank, the slowest growth since November 2009.
"We had a seller, he had his home on the market at £15m (€20.6m) and he pushed it to £18m," following the election, said Alex Newall, managing director and founder of broker Hanover Private Office. "It's not suddenly worth £3m more just because the election is out the way."
The election result lifted shares of London-based brokers and homebuilders. Foxtons Group Plc climbed about 9pc on May 8, the day the outcome was announced. Berkeley Group Holdings Plc rose almost 10pc.
Pre-election jitters meant that 79 homes were sold in the 10 districts of prime central London during the three weeks following May 8, according to property data provider Lonres.
That's down from 146 during the same period last year and 120 in the three weeks before the election.
Buyers of the UK's most expensive homes have faced steadily increasing costs as the government raised taxes, culminating in an increase in the stamp duty transaction charge in December.
A purchaser of a £4m home would have paid £161,880 in tax in 2007, according to Savills Plc. The same home, now worth £5.5m as prices climbed, would saddle the buyer with a £572,000-pound tax bill.
That's starting to hurt valuations, according to Knight Frank, and prices in Knightsbridge, Chelsea, Kensington and Notting Hill are now falling, according the firm.
"The stamp duty change came on top of a series of other tax revisions, all of which followed an exceptional period of growth during the financial crisis," said Tom Bill, head of London residential research at Knight Frank.
"The notion of a sudden return to double-digit annual growth or any sense of 'business as usual' is unfounded."
The UK has been grappling with the effects of a lack of housing supply, before and since the election including sharp rises in house prices with calls to open up green areas close to London to development in order to ease demand for existing property.