House prices in central London continued to climb last month, although at a slower rate than they have previously. New data from Knight Frank revealed the value of properties in the capital increased by 0.5 per cent in July, while prices were up by 10.3 per cent year-on-year. The firm noted residential real estate in the city's prime areas now costs 13.5 per cent more than it did at its last peak in March 2008.
Knight Frank explained London is still considered a safe haven for property investment, which is helping support the market, but noted there are several factors contributing to the slowdown in house price growth. One of the main issues is investors' concern over the proposed capital gains tax charges to be levied on assets worth more than GBP 2 million and that are held in company structures. The organisation pointed out there has been considerable activity in the price bracket below GBP 2 million, indicating potential buyers are waiting to see the outcome of the consultation, which will be announced next year.
Last week, CBRE published its own residential report, which suggested the main reason for the continuous house price increases in the London market is the imbalance between supply and demand. The firm noted the city's population has risen by 850,000 in the past ten years, but just 197,000 new homes have been constructed in the same period. However, head of residential research at the organisation Jennet Siebrits said one of the factors causing the market to slow at present is the Olympic Games and the Queen's diamond jubilee celebrations. "Whilst it is hard to distinguish the impact of one-off events [...] on the housing market, it is clear that the housing market is flat, with mortgage approvals edging downwards and a corresponding dip in new lending," she stated.
According to Knight Frank's predictions, price growth in the London market is likely to slow in the coming months, having now fully recovered from its downturn. The ongoing eurozone crisis will continue to weigh on investor sentiment, the firm suggested, although it stressed it is the UK's proposed taxation changes that are causing a slump in the GBP 2 million-plus segment of the market, while homes priced under this threshold are currently over performing.