Bloomberg News

London-Luxury Homes Gain Least in More Than Two Years

November 30, 2012

Luxury-home prices in central London rose at their slowest rate in more than two years in November as investors delayed purchases ahead of possible new property taxes, according to Knight Frank LLP.

The average price of a house or apartment in the U.K. capital’s most expensive neighborhoods climbed 0.4 percent from October, according to an index compiled by the London-based broker. That’s the smallest increase since October 2010, when prices fell 0.2 percent.

Chancellor of the Exchequer George Osborne may introduce levies on homes valued at 2 million pounds ($3.2 million) or more in his Autumn Statement next month. The U.K. government is weighing an annual charge of as much as 140,000 pounds on properties owned by offshore companies and may charge capital gains tax on the sale of luxury homes by nonresidents who aren’t naturalized.

“An air of uncertainty among buyers has greeted the prospect of a new capital-gains tax regime and an annual charge,” said Liam Bailey, Knight Frank’s global head of residential research. “This element of ’wait and see’ in the market from potential homeowners has resulted in a significant rise in prime central London residential stock.”

The number of homes available in areas such as Chelsea and Knightsbridge is about 47 percent higher than the same period a year ago, Knight Frank said. Sales of properties valued at more than 2 million pounds fell by a third in the quarter through September compared with a year earlier. The biggest decline was in the 2 million-pound to 5 million-pound range, which dropped by 44 percent, Knight Frank said.

Price Forecasts

Brokers like Knight Frank, Jones Lang LaSalle Inc. and Savills Plc (SVS) forecast that prime central London home prices will be little changed in 2013.

A sharp drop in values in the short-term is unlikely, Camilla Dell, managing partner at Black Brick Property Solutions LLP, which advises prime-home buyers in southeast London, said in a report.

“The shrinking of bank balance sheets and the increasing in lending standards has actually helped create a more stable ownership dynamic,” Dell said in the e-mailed report. “We therefore see the number of potential ’distressed’ sellers as relatively insignificant.”

Knight Frank compiles the Prime Central London Index from its own appraisal values of a sample of properties in the 13 most expensive central London neighborhoods. Brokers including Savills Plc and Knight Frank define prime central London real estate as homes in the most expensive parts of the city such as Belgravia, St. John’s Wood and Knightsbridge.

To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Ross Larsen at rlarsen2@bloomberg.net.


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