Prime central London property prices are expected to fall by one per cent this year, after it was previously predicted they would rise by a percentage.
Estate agent Knight Frank has revised its forecast for the most expensive properties across London after demand has dwindled.
“The political uncertainty hanging over the UK property market has come into sharper focus since Rishi Sunak announced a general election last week,” Tom Bill, head of UK residential research, said.
“In particular, the reform of [non-UK domiciled individuals] non-dom rules had been causing a degree of hesitation in prime markets since they were proposed in March.”
He added: “Under the old rules, individuals could be resident in the UK without being taxed on their worldwide income.
“Chancellor Jeremy Hunt set out plans to limit this period to four years although there were indications he was prepared to loosen the proposals.”
“Not to be outflanked, Labour devised their own tougher rules, which are still to be fleshed out.”
Bill explained: “Given the near-term outlook for demand in prime central London (PCL) has deteriorated over the last two months, we have revised our forecast and now expect prices to fall by one per cent this year, down from a rise of one per cent predicted in January. “
“All revisions to our forecasts were made before the election was called. As a long-overdue period of price inflation kicks in, we expect cumulative growth of 16.4 per cent in the five years to 2028 in PCL.”
Meanwhile, in the prime London lettings market the normalisation of supply and demand happened more quickly than the firm expected in January.
Knight Frank expects average rental value growth to be two per cent in prime central London this year, compared to the 5.5 per cent reported in January,
“It is unlikely that rental supply will increase in the next few years at a level that will materially impact headline rental growth,” said Oliver Knight, head of residential development research at Knight Frank.
“Private landlords in the buy to let sector continue to feel the pinch from higher interest rates and changes to taxation which have resulted in some exiting the sector. Build to rent supply is increasing, but not fast enough to replace the BTL homes lost.”