"Luxury London Homes Values Are Down by Almost Half in Real Terms" (Bloomberg)
The downturn gripping London’s priciest properties is on course to cross a once unthinkable threshold.
Savills’ Prime London index is down about 27% since its peak in 2014, as a cocktail of taxes, political and economic shocks have created more than a decade of misery for the owners of the city’s finest homes. When the Savills data is combined with the consumer price index, the real-terms drop once inflation is factored in is more than 49%, a Bloomberg News analysis shows.
If values merely remain flat and inflation continues at its current rate, then prices are on track to have halved from their 2014 peak in the first few months of next year. Savills does not expect nominal price growth to return until 2028, its latest forecasts show.
“There probably isn’t the stimulus for a recovery,” Savills head of residential research Lucian Cook said in an interview. “That long awaited recovery is held back not just by circumstances but by stamp duty.”
London’s high-end housing market has been in the doldrums since then Chancellor of the Exchequer George Osborne kicked off a series of changes in 2014 that would significantly increase transaction taxes for the most expensive homes. Successive chancellors have since added surcharges on landlords and second home owners, overseas purchasers and those buying property through companies rather than in their own names.
The shocks of Brexit, the pandemic, increasing wealth taxes and the growing threat to London’s status as a hub for the super rich have added to the list of challanges, exacerbating the collapse in values of the city’s finest residences. For dollar based buyers, the reduction is even starker given the decline of the pound over the period.
The 27% drop in the prime London index equates to a 40% drop in nominal terms for American buyers. Factor in US inflation and the plunge would be 58%.
“It means it is looking very good value,” Cook said.
Savills’ index dates back to 1979 and seeks to replicate the price movements of the best properties in London’s most sought-after districts. The latest downturn comes after a burst of exceptional growth in prime London house prices following the global financial crisis.
In the 35-years preceding the current correction, price growth was about 5% above inflation, Cook said.
The scale of the current downturn can be seen in recent transaction prices. An apartment at Academy Gardens in Kensington recently sold for about £10 million ($13.3 million), roughly half the level for which it was previously marketed in 2007, according to Sami Roberston, founder of Harwood Advisory.