The top end of London’s housing market, which did so much to pull along the capital’s construction economy during the recession, has failed to grow for the first time in four years.
Prices in the 13 neighbourhoods that property agent Knight Frank defines as prime central London were unchanged in October from September, the first month without an increase since November 2010.
Annual price growth has been slowing for the last three years from a peak of 12.6% in November 2011, and fell to 6.5% for the 12 months to October.
Knight Frank puts this down to “uncertainty relating to a series of tax changes in addition to mansion tax”.
The Labour Party plans to raise £1.2bn from the mansion tax – levied annually on homes valued at more than £2m – with overseas-based owners of second homes paying more than those in the UK.
However, Knight Frank said the luxury home market could rebound if a mansion tax is not introduced.
“While we expect zero growth in central London prices throughout 2015, if the prospect of a mansion tax recedes after May, we could see modest positive growth in the second half of the year,” the property agent said.
“Between 2015 and 2019, we forecast cumulative growth of 22% during what we believe will be a more subdued period for the prime central London market compared to recent years.”
Prices in the high end residential market grew 40% in the four years to October, exceeding growth of 15% in the rest of the UK. The growth was strongest in the £1m to £2m price bracket, at 56.4%.
