Prices rose by 0.8% in March, while the annual increase remained at 7.5% but this means prices are up 68% in the five years since the low of March 2009, according to the report from Knight Frank.
But there has been an ongoing slowdown in the annual growth rate to 7.5% from 8.1% in March 2013 and 11.3% two years ago.
However, London has gained a reputation as being a safe have for foreign buyers and the number of overseas purchases soared, especially from Russia and Asian countries such as China.
On a domestic level, a series of tax changes has contributed to slower price growth in some core prime central London markets. Chancellor George Osborne extended taxes on property bought through a company vehicle in last month’s UK Budget. But this is a change that Knight Frank does not expect to have a significant impact on the market.
There is likely to be an ongoing debate about Stamp Duty being increased, especially at the upper end of the market but there is also a general election looming next year and the government may not want to alienate voters.
Indeed, the report points out that government data obtained by Knight Frank shows the contribution of prime London sales to overall stamp duty revenues in England and Wales may not be as high as some might think.
London sales over £1 million accounted for 22% of the £4.7 billion total in the 2012/2013 tax year, while sales over £2 million made a 15% contribution. Transaction volumes in both price brackets represent less than 2% and 1% of the total, respectively.
‘Recent events on the Crimean peninsula have underlined how uncertainty abroad has the potential to affect sentiment in the prime central London market. Travel restrictions on Russian individuals are currently targeted at a narrow group linked to the government, which suggests a limited impact on what is a wider well established group of buyers in London,’ said Tom Bill, Knight Frank residential research associate.
‘Knight Frank web traffic data suggests no marked difference between the Crimea situation and other recent periods of political instability around the world, which can lead to an increased interest in London property,’ he pointed out.
But Russians viewing prime central London property online fell by an average 25% in the 11 months to January 2014 versus the same month in 2013 while there was a 2% year on year rise in February that reversed the decline as political tension grew.
Meanwhile, there was an average 121% increase in web traffic from Ukraine over the whole 12 month period. ‘While it shows demand is resilient, it is too early to predict how a changeable political situation will affect transaction levels,’ added Bill.
