Sellers drop asking prices for London luxury homes after Brexit

A luxury Range Rover SUV automobile stands parked outside the entrance to a terraced house in the Kensington and Chelsea borough of London, on April 1, 2015.
A luxury Range Rover SUV automobile stands parked outside the entrance to a terraced house in the Kensington and Chelsea borough of London, on April 1, 2015.PHOTO: BLOOMBERG

LONDON (BLOOMBERG) - Sellers of luxury homes in London are lowering asking prices following the Brexit vote as political uncertainty and high taxes discourage buyers.

The number of owners cutting prices for prime homes in the capital jumped 75 per cent in the 10 weeks following the June 23 vote compared with the same period a year earlier, according to data compiled by researcher Lonres. There was a 33 per cent increase in the 10 weeks preceding the vote, the data shows.

Vendors were already contending with sales tax increases to as much as 15 per cent for the costliest homes when the June 23 vote to leave the European Union sent a shudder through the London property market. Values for properties in Chelsea and Knightsbridge declined 8.9 per cent and 6.8 per cent from January through August compared with a year earlier, broker Knight Frank said this month.

"The real damage was already done over the past year, with stamp duty hikes and the 10 weeks after June 23 was when sellers had to get real about pricing," said Roarie Scarisbrick, a partner at Property Vision, a broker that advises prime-home buyers.

Prime central London properties sold since the vote have achieved an average of 1,784 pounds (S$3,220) per square foot, or 3.8 per cent less than in the same period a year earlier, the data shows. Sales fell 42 per cent in the 10 weeks after the vote and new instructions dropped 25 per cent, according to Lonres.

Countrywide, the country's largest real estate broker, expects values for properties in prime central London to fall by 6 percent this year. That compares to a 3.5 per cent increase for homes in Greater London, according to the broker's estimates.

The slump is hurting developers, with sales of London homes under construction dropping 34 per cent in the second quarter. The number of residences sold before completion fell to about 4,600 from 6,974 a year earlier, according to data compiled by researcher Molior London seen by Bloomberg News. Molior declined to comment.

There was a 3 percentage-point increase in the stamp-duty sales tax for landlords and second home owners in April, which followed an increase in charges for all luxury-home purchasers in 2014. For owner occupiers, that hike means that a 12 percent tax rate is paid on portions above 1.5 million pounds.