Tax changes put a dent in top of London market
Friday, 3 August 2012 1:33 PM
Rising stamp duty and uncertainty about tax on £2m-plus homes held in company structures have started to impact on the prime central London property market, according to Knight Frank.
The property firm said prices rose by 0.5 per cent in July to take values to a new record high. However, the pace of growth has slowed in recent months and this is the smallest monthly increase since July 2010.
Demand from investors looking for safe haven assets as the Eurozone crisis continues remains strong, with a 23 per cent increase in interest from prospective purchasers in the three months to July compared with the previous quarters.
But Knight Frank says the impact of the tax changes can be seen in a slowdown in the £2m-plus market over the last three months while the sub-£2m market performs most strongly.
Total exchanges across the market were 11 per cent lower between May and July than in the same period last year. Sales of properties worth between £2m and £10m fell 23 per cent while exchanges on properties worth over £10m rose 30 per cent.
Stamp duty on homes worth over £2m was increased to seven per cent in the last Budget and the Treasury is consulting on the charges and capital gains tax that will be levied on homes over £2m held in company structures.
With a final decision due to be announced in this year’s pre-Budget report, Knight Frank said the situation was creating uncertainty and causing some buyers to adopt a wait and see attitude.
Liam Bailey, head of residential research, said: “July’s snapshot of the prime central London market indicates that activity is starting to recede from record heights seen over the last year or two, to a more moderate pace, indicating that price growth may also slow over the coming months.”
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