Prices of London luxury homes in lower-tax bracket continue rising

PUBLISHED : Wednesday, 26 September, 2012, 12:00am
UPDATED : Wednesday, 26 September, 2012, 1:41am

Luxury home prices in central London have risen at their fastest rate in three months in September, powered by demand for properties that escape a new, higher rate of sales tax.

The average value of a house or apartment in the city's most pricey neighbourhoods climbed 0.7 per cent from August, according to an index compiled by London-based broker Knight Frank.

The annual rise was 10 per cent compared with a 13-month low of 9.9 per cent in August.

Chancellor of the Exchequer George Osborne raised sales tax for properties valued at more than £2 million (HK$25.1 million) to 7 per cent from 5 per cent starting in April.

The number of homes sold that weren't subject to the higher levy rose by 23 per cent in the third quarter from a year earlier. That lifted prices in the bracket by about 12 per cent.

"London's market performance continues to be aided by overseas buyers, who account for more than 50 percent of buyers in the 2 million-pound plus market," Liam Bailey, Knight Frank's head of residential research, said. Russian, Indian, Italian, US and French nationals were the biggest buyers from overseas, the broker said.

Foreign buyers accounted for 41 per cent of prime London homes purchased for £1 million or more.

Values have risen 51 per cent to a record since March 2009, the low point for London's prime residential market after the financial crisis, according to the report.

Knight Frank compiles the index from its own appraisal values of a sample of properties in the 13 most expensive central London neighbourhoods, such as Belgravia, Mayfair, Kensington and Knightsbridge.