Price growth for central London prime market revised down

Property price growth in the prime market in central London is likely to be less than expected due to a slowdown in the sector, a new analysis suggests.

Leading real estate firm Knight Frank has revised its 2016 forecast for annual price growth in prime central London to 2% from 4.5%.

The firm pointed out that the prime London property market has faced a number of headwinds in 2015, which reduced annual price growth from 5% at the end of last year to 1.3% in September.

‘These challenges have been led by the increase in stamp duty at the end of 2014, a factor that will continue to weigh on transactions and price growth into 2016 as the market absorbs the new rates,’ the report says.

It also explains that global economic uncertainty centred on China has also dampened demand to some degree. ‘However the strength of the UK’s economic recovery, employment growth in London and the likelihood of continued low interest rates mean price growth will remain positive next year,’ it adds.

It also points out that activity in September and October has increased following a subdued summer and the appearance of some high quality stock has driven demand. However, buyers have become more circumspect and stringent in their requirements due to the stamp duty increase.

‘It has resulted in a flight to quality, meaning demand is particularly strong for properties in the best condition and on a prime floor, street or square,’ the report adds.

‘While the anticipated gear change materialised as summer moved into autumn, there has been no sense the market is entering full-blown recovery mode after what has been a subdued 2015,’ it concludes.