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Home costs in Kensington and Chelsea have fallen to their lowest since 2013, underscoring the underperformance of prime London property due partly to increased property levies, uncertainty over Brexit and non-dom tax adjustments.
The common value within the UK’s most costly borough plunged 15.1 per cent 12 months on 12 months in March to £1.19mn, the bottom since Could 2013, in response to Monetary Occasions evaluation of knowledge from the Workplace for Nationwide Statistics.
In the identical month, UK home costs rose by an annual price of 6.4 per cent to a file excessive of £271,000, the quickest annual tempo since December 2022.
Native housing knowledge relies on a smaller variety of transactions, leading to extra volatility and bigger revisions, however costs in prosperous Kensington and Chelsea have fallen 12 months on 12 months for the previous 30 consecutive months and for greater than half the time since 2015.
In March, home costs had been additionally down in different high-end places within the UK capital, together with Hammersmith and Fulham, and Westminster, which registered annual contractions of 13.2 per cent and 20.1 per cent. In each areas, the decline lasted for no less than the previous 15 months.
Lucian Cook dinner, head of residential analysis at actual property firm Savills, mentioned the “extended bull run” loved by the prime London market “actually modified round 2014” when reforms to stamp obligation drastically widened the hole in charges between high-end properties and cheaper ones.
Components together with Brexit, the abolition of the non-dom tax regime, the Covid-19 pandemic, elevated stamp obligation charges on second houses and better rates of interest had since “performed towards a market which has primarily been far more dependent upon flows of worldwide wealth than it has essentially on the price and availability of home mortgage debt”, he added.
The non-dom regime — which allowed overseas domiciled nationals resident in Britain to earn cash from overseas with out paying UK tax on it for as much as 15 years — was scrapped by chancellor Rachel Reeves final 12 months, after her Conservative predecessor Jeremy Hunt mentioned he would abolish it.
The ONS on Wednesday mentioned the top of a brief stamp obligation vacation on April 1 — which took thresholds again to pre-2022 ranges — boosted nationwide home costs in March, significantly within the North East, the place prices jumped by an annual price of 14.3 per cent.
As of final month, first-time patrons will begin paying the levy after they purchase properties price £300,000 or extra, down from £425,000 in the course of the vacation. Stamp obligation on the costliest properties, which make up the prime London market, stays unchanged.
Regardless of not being adjusted for inflation, home costs in prime London native authorities had been down from their mid-2024 ranges in March, however up by virtually 60 per cent within the UK and by 33 per cent in London general.
Home costs within the capital underperformed the remainder of the nation in the course of the pandemic, although indifferent properties in prime places loved momentary boosts.
Stuart Bailey, head of super-prime London gross sales at actual property group Knight Frank, mentioned it had “been a 10-year gradual ebbing in pricing, as a result of there was much less demand” as stamp obligation rose and “worldwide patrons are desirous about what they need to do”.
A “huge value inflow” within the 4 years to 2014, Bailey added, was “not sustainable over the long run” and “we ended up on an extended downward development”.
Throughout 21 worldwide prime markets, London and Kuala Lumpur had been the one markets to register a fall in property costs in greenback phrases over the previous decade, in response to research by Savills.
Whereas the ONS tracks all properties in every London native authority, Savills based mostly its analysis on solely high-end properties. Its evaluation of the capital’s prime properties in the costliest native authorities discovered the typical property value in central London was 21.2 per cent down on its June 2014 peak within the first three months of this 12 months — equal to a saving of £1.2mn on the standard property, which now prices about £4.6mn.
Savills expects home costs in prime central London to contract by 4 per cent this 12 months.
Richard Donnell, govt director of property consultancy Houseful, mentioned sustained home value progress in high-end components of the capital can be “dependent upon stronger financial progress and elevated inward funding into the London economic system”.
Bailey at Knight Frank mentioned “sentiments want to enhance” for the development to be reversed. Whereas the capital’s long-term stability by way of politics, private safety and monetary stability meant it nonetheless had “attract and attraction” for a lot of worldwide patrons, “we mustn’t be complacent about that”, he added.
