Brexit and stamp duty changes are killing house prices for London’s richest people

A row of houses in Primrose Hill, LondonI Wei Huang/Shutterstock

LONDON — House prices in central London fell by as much as 14% year-on-year in January as changes to stamp duty and Brexit-related uncertainty continue to damage the market.

Knight Frank’s “Prime Central London Sales Index” found that house prices fell by 6.7% on average across central London, dropping by 14% in Hyde Park, 13% in Chelsea, and 12% in Kensington compared to 12 months ago.

Tom Bill, head of London residential research at Knight Frank, said that stamp duty changes introduced by former chancellor George Osborne were a bigger factor than the Brexit vote.

Osborne surprised investors in April 2016 by hiking stamp duty on second homes by 3%, and the move has been widely criticised for damaging an already fragile market.

“While Brexit and Donald Trump dominate the wider political and economic landscape, it would be wrong to overstate their impact on the prime London property market,” Bill said.

“Higher rates of stamp duty are still a bigger issue than the prospect of Article 50 being triggered in March.”

Take a look at how far property prices dropped across central London:

Knight Frank

Heading towards a recovery?

Bill pointed to early signs of a recovery, however, pointing to higher transaction volumes — the number of houses being bought and sold — which normally precede an uptick in house prices. The number of Knight Frank exchanges in January was higher than in the same month in the previous two years, and was comfortably ahead of the ten-year average for January.

House prices are also pointing towards some recovery. Take a look at this chart:

Knight Frank

It shows that house prices fell only fractionally in January (see “monthly change”), suggesting that house prices could at least start to level out over 2017.

Bill said: “Price growth began to show signs of bottoming out. While there was an annual decline of 6.7% in January, we forecast a relatively flat market in terms of price recovery in 2017.”