London's luxury housing boom runs out of steam

Price gains in capital's best districts trail other large cities as political uncertainty cools demand

PUBLISHED : Wednesday, 29 April, 2015, 2:02am
UPDATED : Wednesday, 29 April, 2015, 2:02am

London's luxury housing boom is running out of steam, with price gains in the city's best neighbourhoods trailing poorer districts and other large cities in Britain.

Home values in the Kensington and Chelsea borough rose the least in the city in the 12 months to March, while Newham, one of the least-expensive boroughs, climbed the most, property researcher Hometrack said in a report on Friday.

Central London home prices soared to records after the financial crisis as a cheap pound and political stability attracted foreign buyers.

Now, political uncertainty around the May 7 national election, the threat of a mansion tax from the Labour Party and high prices had dampened demand for the most expensive homes, Hometrack said.

Meanwhile, values in Britain's other big cities rebounded. Glasgow's annual price increase of 7.6 per cent and Manchester's 6.8 per cent rise beat central London for the first time since 2005. Prices in the capital overall rose 11.8 per cent, the second most after Oxford's 13.4 per cent.

"The pattern that we are currently seeing in regional cities is similar to what we witnessed in London from 2011 to 2013, except the majority of demand for housing in these cities is coming from domestic owner occupiers," said Richard Donnell, Hometrack's research director.

"It is not being boosted by international buyers or excess investor demand."

Average prices in Kensington and Chelsea, which includes the Knightsbridge district, rose 3.4 per cent to £1.2 million over the 12 months. Hammersmith and Fulham was second from the bottom with a gain of 5.1 per cent. Westminster, which includes the Mayfair district, was the fifth-worst after prices rose 5.9 per cent.

Wandsworth, where developers are building tower blocks on the south bank of the River Thames at plots including the former Battersea Power Station, was the fourth-worst performer with a 5.8 per cent increase. Camden was third from bottom.

In Newham, the borough in east London where most events for the 2012 Olympic Games took place, values gained 14.2 per cent.