London luxury sales volume drops hard as new tax takes effect

Number of transactions dropped to a post-crisis low in April
May 09, 2016 08:06AM

The prime Central London luxury home market – a major center of post-crisis real estate investment – in April recorded its lowest monthly sales volume since 2009, and a new tax on home purchases may be a big reason for it.

Just 125 Central London homes sold last month, a significant drop even from the previous low of 151 sales recorded in January 2009, at the height of the financial crisis, according to data from London broker Huntly Hooper.

The low sales figures follow the implementation of a new tax on real estate transactions in the city – in the form of a one-off stamp duty at the time of sale — that adds about 3 percent to prices for buyers based outside the U.K. and those seeking to invest in the properties as rentals, the Wall Street Journal reported.

While long-term price growth has slowed demand in the city to some extent, the numbers may still prove to be something of a blip. In March, just before the new rules took effect, the area saw 420 sales, well above the long term average of 310 sales, according to the data.

The new London tax is roughly analogous to New York City Mayor Bill de Blasio’s proposed pied-a-terre tax, which would add 1 percent to the price of all homes in the city purchased for over $1.75 million. Groups such as the Real Estate Board of New York have backed the plan, saying it would raise needed revenue. Other have argued such a tax could drive potential foreign buyers to other world cities, such as … London. [WSJ]Ariel Stulberg