Tax hikes and political uncertainty have hit London's prime property market which saw its lowest annual growth rate for six years. The upcoming London mayoral election and the EU referendum, combined with a spike in stamp duty, have contributed to the market's low growth rate of only 0.8% to March 2016.
Knight Frank says that low growth is unlikely to change in the short-term due to tax changes announced in the April budget which include an extra 3% stamp duty for buy-to-let properties and second homes. It said that growth in the British capital is only positive due to good performances of eastern markets like the City and Islington.
Tom Bill, Knight Frank's head of London residential research said prices in high-end neighbourhoods like Knightsbridge declined by up to 7% and that tax changes have meant more trading in lower price brackets. "Transaction volumes have slowed more markedly above £2m across London since the stamp duty reform of December 2014, which increased the rate above £1.1m.
"While demand has slowed, there is an increasing sense that traction is returning as asking prices align with the expectations of buyers, a trend reinforced by a narrative of declining prices in the media."
The rise in stamp duty has slowed down the sales market, but boosted the lettings market in the super-prime sector by 29% in the year to 31 March. Knight Frank's London residential review found that Brent performed the best out of the capital's 32 boroughs in the optimum portfolio mix.
Knight Frank forecasts a -2% decline in western markets and 5% growth in markets east of Mayfair and south of the River Thames in 2016.