Houses in Hype Park district have seen their value drop by 14% in the last 12 months. This represents the biggest drop in one of central London’s prime neighborhoods.
The number of sales across London prime regions has increased but this is viewed by Knight Frank as a direct result of house prices falling. London saw a 6.7% drop across the capital’s best districts due to Brexit and sales tax increases.
Even areas like Chelsea and Kensington saw a drop of 13.3% and 11.9% respectively. Tom Bill, head of London residential research at Knight Frank, wrote in the report. “In some instances the EU referendum was the catalyst for overdue price reductions.”
“While Brexit and Donald Trump dominate the wider political and economic landscape, it would be wrong to overstate their impact on the prime London property market,” Bill said.
“Higher rates of stamp duty are still a bigger issue than the prospect of Article 50 being triggered in March.”
A 3 percent levy on second-home purchasers and landlords, introduced in April 2016, followed an increase in charges for all luxury-home buyers in December 2014. The stamp duty for a £7.5 million ($9.4 million) residence to be used as a second home is now more than £1 million.
Luxury London home prices reached a low of at least 22 months in September and are now 6.9 percent below the November 2014 peak, LonRes data show. The average price per square foot is now £1,787 ($2,229), which equates to about £1.8 million based on average home sizes according to the English Housing Survey, published in Feb. 2016.
Interestingly, London is in the grip of a ‘reverse ripple effect’ as prices in the capital’s cheapest boroughs are now rising faster than the most expensive areas according to a new report.
The analysis, from estate agent Jackson-Stops & Staff, reveals 20% of the price growth in the five cheapest boroughs has taken place in the last 12 months alone, with values rising a total of 68% in the last decade from £203,000 to £344,000 in areas such as Croydon and Barking and Dagenham.
The report highlights Southwark and Lambeth as two central areas bucking this trend and outperforming in the short and long term. A boom in luxury high-rise homes along the South Bank has led to this area becoming London’s strongest-performing neighbourhood, with the number of sales up an astonishing 114 per cent year on year.
Prices are tipped to continue to rise in the diverse borough that offers something to buyers at each end of the price spectrum – a studio flat at One Blackfriars is on the market for £10 million while a one-bedroom flat in Peckham is listed for £225,000. Plus, savvy buyers are being lured to the borough due to the new Bakerloo line linking Elephant & Castle and Lewisham to the West End, even though the route is 10 years off.
DMZ sees a silver lining for those struggling to get on the London housing ladder, however it could be a double-edged sword – home values can only rise so far before buyers also start to be priced out of London’s undesirable and more ‘affordable’ areas.
We may see house prices drop over the near term, but due to a continued, unaddressed lack of supply the long term London property will remain to hold significant value.