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Priciest London luxury homes lose their shine

Brokers cite fears of tax increases and sellers who aim too high

Posted on 07-Nov-2013

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Priciest London luxury homes lose their shine

[LONDON] Price gains for London's most expensive homes have stalled this year as concerns about possible tax increases and high asking prices put off even the super rich.

Houses and apartments valued at more than £15 million (S$30 million) showed almost no gain in the year through September, compared with a rise of about 5 per cent for properties from £1.8 million to about £5 million, real estate broker Savills Plc said in a report.

Luxury residences outside central London rose by about 10 per cent.

"There are a lot of vendors out there who think their house is worth £3,000 per foot because they've read that somewhere," said Alex Michelin, a founder of luxury developer Finchatton Ltd.

"The house that got £3,000 was immaculate, brand new, had facilities and technology. Their flat is 20 years old," he added.

Luxury homes in central London will rise 23.1 per cent through 2018, compared with a 25 per cent increase for British residences overall, Savills estimated.

Properties worth more than £15 million will climb at a slightly slower pace than the rest of the capital's prime market and the UK as a whole, Lucian Cook, head of research at Savills, said.

Prices at the top end of the London market will be supported by a lack of supply over that period, he said.

London luxury homes had been increasing since September 2009, according to the Savills data.

Properties worth £15 million or more showed little or no rise for the first time since about December 2009, the data showed.

Home values in London's best areas including Mayfair, Knightsbridge, Belgravia and Chelsea increased at least 128 per cent from mid-2005, compared with a fall of 19.3 per cent in the value of all UK homes in the same period, broker Savills said in a September report.

Wealthy prospective buyers are being deterred by talk of higher taxes, Finchatton's Mr Michelin said.

Chancellor of the Exchequer George Osborne raised a transaction tax to 7 per cent from 5 per cent for properties priced above £2 million in March 2012. He is considering imposing capital-gains tax of foreign owners of UK property, Sky News reported last month.

"Clients are saying 'well, are we welcome here?'," Mr Michelin said. "That's really what's causing a pause in the market."

Home prices in the borough of Westminster, which includes the affluent districts of Mayfair and St James's, have fallen for three months in a row through August, dropping from an average of £1.23 million to £1.1 million, researcher Acadametrics said in an Oct 11 report.

Will Bax, director of Grosvenor Group Ltd's London assets, said he's cautious about the market for homes worth £5 million or more.

The Grosvenor family's ancestral London land holdings are in Mayfair and Belgravia, districts that are consistently among the world's most expensive for leasing an office or buying a home.

Two years ago there "was an extraordinary market" for London luxury homes and demand led to a "kind of irrationalism that has probably been tapered slightly", Mr Bax said.

Top-tier buyers are "not in the mindset where they're desperate to buy anything at any price," said Liam Bailey, global head of residential research at London-based broker Knight Frank LLP. "There's a slightly more sober mindset in that price bracket." - Bloomberg

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