Fears over potential changes to tax policy in Labour’s upcoming budget have continued to dampen the positive effects of lower interest rates on demand for prime property in London, according to new data.
Buyers are nervously awaiting potential tax changes in the Government’s first budget, which has been described as assigning a “heavier burden” to “the broadest shoulders.”
The latest prime sales index from Savills has revealed that values for prime properties in prime central London fell by 0.7 per cent, “given concerns around changes in the tax environment and general market uncertainty”.
Values for prime properties in outer London markets like Hampstead and Victoria Park, which tend to attract families looking to settle rather than those looking for city pads, grew marginally over the past three months, by 0.2 per cent.
“We would usually expect the top end of the market to be the first to react to improved market conditions [but] concerns over what the budget may hold have made buyers more cautious, especially in the most discretionary prime markets,” Lucian Cook, head of residential research at Savills, said.
The prospect of an increased tax burden ranked as the top concern for three quarters of buyers, followed by general market uncertainty, according to Savills agents.
“Tax concerns, including changes to non-doms tax status, have caused potential buyers in central London to take stock of their situation. However, while there is plenty of anecdotal evidence of people reviewing their tax status, there’s little evidence of this resulting in more stock hitting the market,” says Cook.
“Although there is speculation about what the October Budget may bring, the downside risks in these markets are mitigated by the fact that values remain low in a historic context, and by the enduring appeal of the capital, which will ensure that even those affected are likely to keep a base in prime London neighbourhoods.”
According to a report from real estate company Knight Frank, there were 22 per cent fewer property sales above £10 million in the 12 months to July, and super prime sales volume in London – properties above £30m – halved.