London’s luxury property market appears to have stagnated as additional costs have been piled on to the cost of acquiring a high-end home, reported CNBC citing Knight Frank.
Knight Frank chairman Alistair Elliot noted that the higher cost of acquiring a high-end home has “just stalled the market” in Singapore and Hong Kong. In the UK, stamp duty increases are “leading to a more stagnant market at the top end”, he said.
This comes after prices in London’s top-end of the market have surged by double digits close to every year, due to increased investment from foreign buyers and domestic money.
“There was bound to be a period of cooling, and I don’t think that’s necessarily a bad thing,” said Elliott.
“The fundamental issue in the mid-term is supply, and the Stamp Duty at one end is not going to increase supply at the other. We’ve got to introduce more affordable homes. The only way this is going to be addressed properly is by more government influence,” he added.
On Monday, George Osborne, the UK’s Chancellor of the Exchequer, promised to relax the rules on developing brownfield sites (land previously used for industry) for residential use. For years, politicians have also been promising to construct more homes in the UK but with little effect.
Caution has also emerged as the period of cheap money, driven by record low interest rates and quantitative easing programmes on both sides of the Atlantic, appears to have come to an end.
“There has been a massive build-up of investment capital, and increasingly that capital has seen property as its right home,” shared Elliott.
He acknowledged that London has seen the level of foreign buyer interest in residential property slow down.
“Where there is strife, the first thing we see is there is a flight of capital to safe havens. The mid-term is likely to be that people slow down.”
Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
