The Chelsea house price plunge: here’s how low prices will go
Stamp duty changes rocked the central London housing market last year as buyers became less keen to fork out thousands of pounds in transaction taxes for homes worth over £1m.
Asking prices on high-end homes in London's most affluent boroughs were slashed – some by as much as 30 per cent – as home-movers sought to shift their stock.
By January, house prices in Chelsea had fallen by 13 per cent, and in Kensington, prices were down by nearly 12 per cent.
House prices were hit hardest in west London (Source: Knight Frank)
So what can we expect from London's property market this year?
Anthony Codling, analyst at Jefferies Bank, has predicted that Zone 1 prices will fall by 10 per cent on average this year, and that prices in Zone 2 will be flat.
Read more: These are the three London areas where house prices fell in January
"Uncertainty likely to remain in my view until will know what London looks like once Article 50 has played out," he said. "If the financial services sector moves to mainland Europe, minus 10 per cent maybe optimistic, if London retains its current importance and global city status, minus 10 per cent may be overly pessimistic."
Simon Rubinsohn, Rics chief economist, said tax changes have had a significant impact on central London prices, and that in the near-term, prices might "slip a bit more".
But, over the next year the market will be more stable, he said, as much of the price correction has happened already.
"There are signs that perhaps there will be a more stable trend in prices," he said. "You're not going to see prices shoot up though."
Knight Frank's research shows that central London house prices fell by seven per cent last year, and the estate agents have forecast that prices on prime homes in outer London will fall by 1.5 per cent. However, they expect west London prices to stay flat in 2017.
Read more: This one graph explains the horrors of London house prices
Thomas van Straubenzee, managing directors of central London estate agents VanHan, said that prime central London prices will depend on the value of the pound.
"Whilst sentiment is weaker than the stronger 2014, 2015 and early 2016 markets, there is still very much an active market in prime central London," he said.
Expect to see house price growth in the outer London borough this year, though. Codling predicts house price growth in Zones 3 through to Zone 6 will come be the range of three to five per cent.