London house prices: Prime central property prices will drop this year, but the cool-down won’t last long, says Savills
The price of London’s prime property will decline in price this year on the back of last 2015's stamp duty reforms, but they will climb by a whopping 21.5 per cent over the next five years, an estate agent has predicted.
Prime central London property prices, which average at around £5m, will drop two per cent this year and stay flat in 2016 before making a swift rebound, said Savills.
Prices in other high-end areas are less likely to fall this year, but will become steadily more expensive over the next five years.
Prime central areas include Knightsbridge, Westminster, Mayfair and Kensington and Chelsea, which have an average value of £2,000 per square foot.
Savills' head of residential research Lucian Cook said:
The stamp duty reform of December 2014 was a defining moment for the top end of the prime London market, particularly as it was looking fairly fully priced having grown significantly to outperform the rest of the market over a 10 year period.
It is fair to say that last year’s Autumn Statement took the market by surprise and has essentially prevented any bounceback in values post election, leaving little scope for significant value uplift next year, particularly in a low inflation environment.
Thereafter, we expect the depth of the market and the maturity of London as a global city, coupled with job creation and economic growth forecasts to return to long term trend rates of real price growth, particularly, but by no means exclusively, in core prime central London locations.
Chancellor George Osborne announced immediate tax changes last year which increased the tax payable on property sales over £1m. As the policy was announced in the afternoon but took effect at midnight, it caused a flurry of activity as agents rushed to push deals through before the following day.
Savills also said the Mortgage Market Review – a set of strict affordability rules introduced by the government in April 2015 – had cooled prices this year, and will continue to weigh on growth over the next five years.