Overseas property investors have dropped out of the prime London residential market since stamp duty was raised in the last budget.
Estate agents London Central Portfolio reckon prestige property sales have collapsed 53% since Chancellor George Osborne hiked the stamp duty rate up from 5% to 7% on homes valued at more than £2 million in March 2012.
One casualty is singer Amy Winehouse’s former home in Camden Square, London, which is heading for auction at a guide price of £1.8 million, after sitting on the market unsold for more than a year with a £2.7 million price tag.
However, although the number of homes changing hands dropped 9% in the quarter ending September 2012, prices increased 3.7% to a record high of an average £249,958.
Super prime property sales – homes valued at £5 million or more – are fuelling the market and propping up rising prices, says the agent, reporting 60 sales of super prime homes in the quarter – up 88% compared with the same period 12 months ago.
Negative response
It’s homes valued at below £5 million that are proving difficult for estate agents to shift.
“The drop in house sales in prime central London almost definitely comes from the negative response to the tax changes announced in the budget,” said a spokesman for the firm.
“Besides putting up stamp duty to 7% for individuals buying residential property worth more than £2 million, the rate also jumped to 15% for companies.
“The government also plans, but has not confirmed, a mansion tax of up to £140,000 a year on homes held by these companies as well as a new capital gains tax on their disposal. This action was aimed at Central London, where more than three-quarters of homes valued at £2 million or more are located.”
£6,000 per square foot
The firm predicts the private rental sector has yet to feel the full effect of the tax changes.
“In making the capital less attractive to overseas property investors, we expect a 10% decline in the rental sector is not beyond expectation,” said the spokesman.
A recent report by global property consultants CBRE placed London as the most expensive prime property market for homes in the world – ahead of Hong Kong and New York – with prices of up to £6,000 per square foot.
Part of the resurgent market was down to investors considering property as a haven for their money as markets struggled to match investment performance with London property prices.
