As recently reported, it is said that analysts are in fear that the U.K property market would crash and with the many foreign investors thought to be checking out of the London market, a "domino effect" of economic catastrophe might be triggered. But amidst these fears, government-backed investors like GIC is said to be interested in making more investments in London.
Does this mean that there is nothing to fear in the U.K property market? According to WJS, the real-estate in prime central London has not gone into a bubble but it doesn't look promising in the near future either. According to Savills estate agents, prices in prime London are expect to fall by the end of the year to a least 2 percent. The homes that are priced more than£5 million, or just over $7.6 million will be greatly affected.
In addition, LonRes, a property-market analyst, notes that demand dropped by nearly 60% in the third quarter of this year versus the preceding quarter. It is said that the increase in taxes paid by home buyers at closing is partly a factor why demand has fallen.
With the new system, buyers of homes priced above $1.4 million ended up paying more in taxes. For example in prime London, if one buys a property that is about $3.5 million, Cluttons estate agents says that buyer ends up owing the government $ $288,000 in stamp duty and that is more than 15 percent higher than what the stamp duty amount would have been before the new system was implemented.
On the other hand, there are some who believe that London's prime market was already going down before the stamp duty was increased. Lucian Cook, director of residential research at Savills, explains that, "It was looking very over-valued." Savills has forecasted that there will be no growth in prime central London in 2016. There will be slow growth however in the following years.