Is London property market losing its number one slot?

The luxurious end of the London property market has been the most popular in the world for some time now. There have been attempts to talk the market down, tax increases have slowed demand but until recently this had limited impact. However, there are signs that the ongoing attack on UK property via increases in the stamp duty tariff are starting to make investors think again.

While we have seen similar stories over the years there does seem to be a little more credence with regards recent comments by estate agents and investors.

Luxury sales down

During the period July to September there has been a year-on-year fall in the number of sales of just over 22% for London homes valued between £1 million and £2 million. The situation is a little more drastic towards the higher end of the spectrum with property sales valued between £3 million and £16 million falling by around 30% in number.

There has been talk of investors switching from London to the likes of France and New York, there has been talk of repatriations by some of the larger investors but so far there has not been a dramatic fall in the value of high end London property. This would seem to indicate that there is little supply at the moment and perhaps demand just below current levels.

Tax changes kicking in

Since the UK government decided to wage war on second home owners, buy to let investors and those with properties valued towards the top end of the market, some investors have taken fright. There are fears that the market is seen as an “easy target” as governments look to balance their books. Indeed, in tandem with the painting of bankers as the devil incarnate there is a similar move towards those who own expensive properties.

It may well be that investors have decided to sit on the sidelines, they’re not leaving London in their droves as many would have you believe and the market will rise again. However, there is also no doubt that uncertainty regarding future increases in costs associated with London luxury properties is also in the minds of investors.

Has London had it too easy?

While the vast majority of high end London properties are acquired by those living in the UK there has been an increase in overseas investment in recent years. The domicile rules, which have since been tightened, seemed to encourage overseas investors as did other tax loopholes. Those selling properties in the likes of New York and other luxury markets will welcome a reduction in London’s competitive edge but will it really have any major long-term impact?

The vast majority of high-end luxury properties bought in London have bought by individuals who have little in the way of financing concerns. That is not to say they do not wish to protect their assets going forward but will an increase in stamp duty and reduced tax benefits really force them to look elsewhere?

Many people forget that London has more to offer than just a luxury property market and is seen by many as the financial centre of not only Europe but also one of the major financial markets of the world.

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