The value of the London luxury housing market is experiencing a severe slump, leading some to question if the bubble has already burst.
The prices of homes in London valued at £5 million (roughly $7.6 million) or more dropped 11.5 percent on a per square foot basis in the third quarter from a year earlier, according to a study by Richard Barber, a director at brokerage W.A. Ellis, a division of Jones Lang LaSalle.
The study, cited by Bloomberg News, also showed that sales volumes across all homes in the most desirable neighborhoods of central London dropped 14 percent in the period.
“The bubble may already have burst” for the most expensive homes, Barber told Bloomberg. “36 percent of all properties currently on the market across prime central London are being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5 percent.”
Some are blaming the slump on Chancellor of the Exchequer George Osborne’s stamp duty increase. The change means that the purchaser of a £5 million home now pays £513,750 in duty, about £164,000 more than in the past.
“The downturn in price growth in 2015 has reduced the number of these properties entering the market as discretionary vendors are willing to wait for prices to recover,” broker Strutt & Parker wrote in another report this week.
The report also acknowledged that the strength of the pound has made it more difficult for overseas buyers to afford London real estate. [Bloomberg] – Christopher Cameron