London-falling-Tough-times-for-luxury-property-in-the-capital

London Falling? Tough Times for Luxury Property in the Capital

09.10.17

When a sprawling central London mansion known as the Clockhouse was put on sale back in 2013, no one batted an eyelid at the £8 million (Dh39.3m) price tag.

At the time, London was in the grip of a property buying frenzy. Houses put on the market were being snapped up within a matter of weeks, and often for well above their asking price.

Fast forward four years, and the Clockhouse – a 5,000 square feet Victorian building formerly owned by businessman Ivan Massow – is still up for sale. And its asking price has halved to £4m.

The Clockhouse is a stark example of the slowdown in London’s prime property market. Last week, it was reported that house prices in the capital have fallen for the first time since 2009. According to mortgage lender Nationwide, prices in London dropped to an average of £471,761 in September, down 0.6 per cent compared with the same month last year.

That makes the British capital – which has attracted property investors around the world – the weakest performing region in the country for the first time since 2005.

“London has seen a particularly marked slowdown,” remarked Robert Gardner, Nationwide’s chief economist, citing pressure on household incomes, political uncertainty and stamp duty changes (a UK property transaction tax) as reasons for the slump.

The top end of the market had been expected to fare better. Indeed, after last year’s Brexit referendum, the prime London property market was expected to be one of the biggest beneficiaries of the vote to leave. The theory was that the collapse in the value of sterling would make a luxury abode in Knightsbridge, Mayfair or Chelsea more appealing for foreign buyers.

It hasn’t worked out like that.

In a recent report, upmarket estate agent Savills said prices of multimillion properties in central London slumped by 3.2 per cent in the first nine months of this year, as an inconclusive general election and the start of Brexit negotiations dampened buying activity. Values are now 15.2 per cent below their peak three years ago.

Political uncertainty is to blame, as the “complexity of Brexit” becomes increasingly apparent.

“Uncertainty fuelled by Brexit and a weakened government mandate since the June election means sentiment is fragile,” said Lucian Cook, the head of UK residential research at Savills.

The real estate services provider is forecasting prices in prime central locations to flatline for nearly two more years before staging a small recovery at the end of 2019.

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