For years prime central London property has been likened to gold dust attracting rich tycoons with gazillions buying up property in Mayfair, Belgravia, Chelsea and Kensington.
But, not anymore.
Savills is predicting a 1% drop in prime central London property prices by 2015, its first decline since March 2009. Figures also indicated that price growth slowed from 3.1% in the last three months of 2013 to 2% in the first quarter of 2014.
Love them or loathe them, rich overseas buyers pump a lot of money in the capital. The fact that they’re being put off by central London property may result in London losing investment.
Take a look at four reasons why prime central London property discouraging them:
1. Capital Gains Tax
From April 2015, foreign property owners will pay tax on any gains in value on UK properties they own. How does that deter prices? Well, around 65-70% of new build homes in prime London locations have gone to overseas purchasers in the last two years.
This tax rhetoric has resulted in a word of caution in the market which may warn off your typical rich overseas tycoons.
2. Stamp duty
George Osborne’s crackdown on “buy-to-leave” investors may also be one of the main reasons prime central London property will drop. Osborne announced that any purchase of residential property worth £500,000 or more made through a company will incur stamp duty at 15%.
There’s always that argument that foreign investors wouldn’t mind paying a few extra bucks for London property. However, the increasing values of various levies will discourage foreign buyers to come to the capital.
3. Mansion Tax
Another factor that may result in a drop in prime central London property prices is mansion tax. Rich property owners are up in arms about the tax as they feel they’re being taxed for being rich.
London Mayor Boris Johnson has always been against the tax. Writing in Mail on Sunday recently, he said: “Labour and the Lib Dems would have you believe that the people they want to hit are oligarchs and international bankers.
“But the overwhelming majority of victims would be Britons who find themselves living in a house that has nudged over the threshold.
“That includes people who currently have no idea of the risk they face.
“It is hard to think of a tax that is more viciously unfair. It hits families who have worked hard and traded up the property ladder only to find themselves walloped for their success.”
4. Strengthening pound
Savills found that one of the main reasons London became the mecca for a property punter was good exchange rates. But with the pound increasingly becoming stronger, a lucrative exchange rate no longer is a factor that attracts buyers.
5. Interference in the market
Peter Wetherell, chief executive, Wetherell thinks constant government interference is not helping the prime central London property market either.
Writing in our publication Securing Britain’s Growth he said: “The biggest issue affecting the property industry is the constant interference by politicians and the government. Measures after measures to control prices are creating confusion in the market. It’s high time the government gives market forces the onus to look after themselves.”