Luxury London home prices at 6-year low

While values fell in capital’s prime postcodes - which include Chelsea, Islington, Kensington and Mayfair - there is hope longer term

Luxury London apartment complex One Hyde Park. REX

Political chaos and a series of tax hikes pushed the average price of a home in London’s most-desired districts down by almost 5 per cent last year, paring it to a low not seen since the start of 2013.

Home prices in the UK capital’s prime postcodes - which include Chelsea, Islington, Kensington and Mayfair - dropped 1.5 per cent in the final quarter of 2018 as lawmakers failed to reach an accord on Brexit, data compiled by broker Knight Frank show. That extended the decline for the year to 4.6 per cent.

London’s high-end house prices have been hit by a succession of tax reforms that have boosted the sales-tax bill for the most expensive homes to as much as 15 per cent of the purchase price. The hikes, coupled with uncertainty about the country’s political and economic future, has decimated the market for homes and reduced transaction levels to historic lows.

“Both pricing and sales volumes were on a downward trajectory in the second half of 2018,” Knight Frank’s head of London residential research, Tom Bill, wrote in the report. The downturn highlights “the impact of political uncertainty over the last six months.”

Prices in the best areas around the edges of central London, where thousands of new apartments are being built, fell at a near identical pace to the prime areas and are now at a five-year low, the broker said in the report Monday. Those districts include Canary Wharf, Hampstead, Richmond and Wimbledon, Bloomberg said. Pockets of housing-oversupply in some of those regions are also eroding values.

Savers earned more in interest last year than property owners recouped in house price growth for the first time since 2012, according to figures from Royal London, an insurance firm.

The best fixed-rate savings bond on the market pays 2.75 per cent a year, said Moneyfacts, a data provider.

In contrast, figures from the Land Registry showed the value of the average home in England rose just 2.6 per cent in the past 12 months to £247,430.

Those in the best easy-access account, which pays 1.54 per cent, would have beaten house price growth in London (down 0.7 per cent) and the South East more generally (up 1.1 per cent).

Despite negligible capital growth across London in the short term, there are pockets of regeneration that represent opportunity.

Acton is riding a wave of regeneration sweeping west London from Ealing to Hanwell, according to Homes & Property. Acton Gardens is one of London’s largest new developments.

The Zone 3 scheme, set over 52 acres and comprising more than 3,400 new homes, has landscaped gardens, areas of green open space and new shops including a Sainsbury’s and a Lidl. One-bedroom apartments are now available from £405,000 (Dh1.9 billion) and two-bedroom apartments from £555,000.

It's not all gloom and doom for the luxury end of the London market - depending on Brexit.

Head of research Adam Challis at consultancy JLL predicts a 15.3 per cent rise in prices at the luxury end of the market in central London over the next five years, once a Brexit deal has been formalised.

"Despite several high-value transactions during this autumn, the prime central London sales market suffered a setback to its recovery.

But, he added, "We believe that some kind of Brexit deal will be agreed ... which will remove a degree of uncertainty and instil much-needed confidence into this highly sensitive market."

JLL and others argue leaving the European Union on good terms - if such a thing proves possible - might give house prices a Brexit bounce-back, Homes & Property said.

JLL forecasts a 14 per cent rise in values over the next five years, underpinned by positive economic indicators such as wage growth, assuming no long-term hangover from the UK-EU divorce.