While the past four years have been splendid, real estate in prime London has not exactly peaked, and the sluggish movement is expected to continue in the coming year, Wall Street Journal reports.
According to a research by Savills, there is an expected 2 percent drop in the prices of prime London estates by year-end. Amongst the most affected properties are homes worth £5 million, or just over $7.6 million. LonRes, a property- market analyst, has seen a 60 percent fall in demand in the third quarter of this year as compared to that of the previous quarter.
Considered as one of the culprits is the increase in the amount of tax that home buyers need to pay upon closing, a rule implemented last year, or also known as stamp duty. In the application of the new system, those who are purchasing homes worth £937,000, or about $1.4 million, and above, face higher tax fees. For instance, the average sale price in prime London is at $3.5 million. With the new stamp increases, a buyer now has to pay $288,000 instead of just $244,000.
However, others believe that the problem wasn't entirely caused by the stamp duty rate increase. It was "looking very over-valued," said Lucian Cook, director of residential research at Savills. The company is seeing zero percent growth in prime central London in the upcoming year, followed by a tiny 2 percent climb in 2017, and slightly higher increase of 5 percent in 2018.
Buying agent Camilla Dell of Black Brick sees the price drop in prime London as an opportunity for sales to pick up and compensate for the damped sales in 2015.
On the other hand, developers are trying to meet demands for more affordable homes with lower stamp duties. They have lessen the square footage, yet provided plenty of communal facilities. "Resident lounges, entertainment spaces, spacious gyms and spas, cinema rooms and games facilities, additional storage facilities, wine rooms, private garages and additional gardens are all almost commonplace in new developments," said Michelle van Vuuren, managing director of residential development at UK Sotheby's International Realty.
Buyers are also now considering buying outside prime London. Kings Cross, which was then one of London's red-light districts, is now the home for Google's UK headquarters, and thanks to the revitalization effort, now offers excellent transportation links which attracted homes, shops, restaurants, and offices that are now in the area.
Meanwhile, agents predict a surge of international buyers come next year.
"At the sub-£5 million level, expect Chinese buyers to flock to London due to recently reduced constraints on gaining U.K. visas for purchasing properties," says Giles Hannah of Christie's International Real Estate.
Billionaires from India, U.S. buyers taking advantage of the strengthened dollar, and Iranians who wish to transfer their assets from the Middle East see prime London as a promising area for investment.
