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Subdued activity levels in the prime central London property market are likely to continue until the autumn as buyers and sellers digest recent tax changes, a new analysis suggests. Annual growth was flat at 2%, down from 7.9% in July 2014, according to the latest prime central London sales index from real estate firm Knight Frank. Furthermore, while total sales volumes in England and Wales fell 11%, the number of £2 million plus deals in London was down by 25% in the first quarter of 2015. A breakdown of the figures for price growth in the year to July 2015 shows the biggest rise was seen in the City and Fringe with growth of 6.6%, followed by Islington at 5.8%, Mayfair at 3.6%, Southbank at 3.4% and Marylebone at 3.2%. South Kensington saw prices rise by 1.9%, St Johns Wood saw growth of 1.5%, Hyde Park 1.2% and Belgravia 1%. Price growth fell by 3.8% in Notting Hill, was down by 1.2% in both Knightsbridge and Chelsea and down 1.8% in Kensington. ‘In the period between the general election and the summer holiday, buyers in London have taken stock of new market conditions and appear less inclined to rush into making decisions,’ said Tom Bill, head of London residential research at Knight Frank. ‘A succession of tax changes has contributed towards low single digit annual growth, meaning buyers and sellers are more prepared to sit on the side lines until later this year, unafraid of missing out on the imminent return of stronger growth,’ he explained. ‘More discretionary buyers are waiting to see how readily recent policy changes will be absorbed. While there seems to be some short-term hesitation around recent alterations to non-dom legislation, it is December’s rise in stamp duty which appears to have had the single biggest dampening effect on demand as buyers digest the reforms,’ he pointed out. ‘Despite the strong underlying economy, the number of tax changes, which have a particularly strong impact on London, means the market is undergoing a period of readjustment,’ he added. The report explains that last December’s rise in stamp duty for properties worth more than £1.1 million appears to have contributed to more subdued activity. Indeed, London accounted for 13% of transactions across England and Wales in the first quarter of this year, but contributed 46.9% of stamp duty revenue, up from 43.4% in the same period in 2014 under the old stamp duty system. Meanwhile, properties worth in excess of £1 million in London accounted for 1% of deals in England and Wales but the revenue contribution increased to 25.8% from 19.8% last year. Overall stamp duty in England and Wales is down in the first quarter, as the government predicted, though it expects house price inflation to help make up any short fall in coming years. Continue reading →
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