Homes in luxury London postcodes, including Belgravia, Knightsbridge and Chelsea, have far outperformed the rest of the UK market in terms of price rises over the last two or three years. Prices have risen by 9.4 per cent in the last 12 months alone, while average prices across the rest of the UK have risen only very modestly, if at all.
Bricks and mortar in the centre of the UK capital is seen as a ‘safe haven’ investment option by international and domestic buyers, and this has helped push prices to new record highs.
But the market for family homes and pied-a-terres in the most fashionable areas of London has been slightly overshadowed in recent months by the announcement of new property taxes by the UK chancellor back in March.
During his annual budget, the Chancellor raised stamp duty for purchases of homes worth £2million plus (HK$24.3 million) from 5 to 7 per cent and trebled it to 15 per cent for those bought by a ‘non-natural person’. A ‘non-natural person’ is broadly defined as a company, a partnership, including a company, and collective investment schemes.
There was evidence that the market largely absorbed these changes, but the Chancellor also said that possible new charges would be levied on properties owned by a ‘non-natural person’ – including an annual tax and capital gains tax (CGT) on disposals.
It has been eight months since that initial announcement, and the effect on the market was clear, with many buyers adopting a wait-and-see stance. In fact, exchange volumes in the £2 to £5m bracket in prime London between July and September fell by 44 per cent compared to the same period in 2011.