More signs of slowdown in prime London housing market

Russian and Asian buyers deterred by stamp duty rise and currency shocks

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Further evidence has emerged of the slowdown in London’s prime housing market, with prospective buyers falling by nearly a third in September according to new research as currency shocks and higher stamp duty charges deter foreign buyers.

Prices of prime central London properties fell 0.3 per cent in October — the steepest monthly decline since the summer of 2010 — according to fresh data from Knight Frank, the estate agency.

“London is an expensive place, and currency fluctuations make it more so,” said Noel Flint, partner at Knight Frank and head of central London residential.

“There are far fewer Russian buyers in London looking to spend £5m to £10m. Their budgets have been trimmed as the rouble is a fraction of what it was. Ditto the Far Eastern buyers. Now the pound is so strong, London is not seen as such good value for money.”

The numbers of properties exchanged in the prime central London market was nearly 17 per cent lower in the three months to the end of September than the same period a year previously, said the agent, which has measured a 30.2 per cent reduction in numbers of new prospective buyers in September compared with the same month last year.

This has caused Knight Frank to more than halve its forecasts for price growth estimates for 2016, from 4.5 per cent to 2 per cent. The current annual rate of price growth stands at 1 per cent, the agent said, the lowest level it has seen in the capital since October 2009.

The agent’s findings are the latest indicator that the capital’s prime property market is cooling off. Deutsche Bank analysts have called time on the London property market “party” arguing “there are multiple catalysts to suggest that 2015 is the turning point.”

Research produced last week by property data provider LonRes for the Financial Times showed prime property sales in London fell 14 per cent in the third quarter of 2015 compared with a year ago, with prices cut on 35 per cent of homes on the market.

The prospect of weak house price growth, combined with higher stamp duty and the introduction of capital gains tax for foreign investors, had all weighed on overseas buyers, Mr Flint said.

However, the domestic buyers were still active in central London, he said. “We are finding the market for homes between £1m and £3m has been much more active compared to the market between £3m and £10m.”

London markets such as Barnes, Chiswick and Clapham had seen good levels of demand as flat-dwellers in central areas such as Notting Hill traded in apartments for a family home with a garden, he said.

However, Knight Frank notes there has been a “stand off” over pricing thanks to higher stamp duty rates for properties priced at more than £1m introduced in the last Budget.

“Buyers calculate it will take them longer to recover the extra stamp duty expense in house price inflation and expect a lower asking price, something vendors are not always willing to concede,” Mr Flint said.

“There are signs that some vendors have realised market conditions have changed since the stamp duty increase and where asking prices have come down, the market is operating in a normal manner,” he added.

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