Sales of luxury homes slump in London due to stamp duty and Brexit

Sales of luxury homes slump in London due to stamp duty and Brexit
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Sales of luxury apartments in London have collapsed by more than 80 per cent since the spring in a “staggering” market slump, the Evening Standard can reveal.

A toxic combination of rocketing stamp duty rates and “Brexit blight” have brought the capital’s prime property bonanza to an “almost complete standstill” and could threaten Mayor Sadiq Khan’s ambitious house-building targets.

Just nine newly-built homes worth more than £5 million changed hands in the six months to October, down 83 per cent from the 52 that were sold in the same period last year, according to an exclusive analysis of the latest Land Registry data.

The figures have triggered near panic among developers and agents specialising in the so-called “super prime” market with one claiming that the Government had scored “a spectacular own goal” by raising stamp duty rates to 12 per cent for homes worth more than £1.5 million.

Meanwhile sales of apartments and houses priced at more than £10 million — existing and new build — were down 75 per cent from 61 to a “critically low” level of 15. There was also a 51 per cent fall in sales between £5 million and £10 million.

The figures are even bleaker than those seen in the property “nuclear winter” that followed the 2008 credit crunch and banking crisis when sales fell by around 45 per cent. They also confirm fears that the slump continued beyond the immediate aftermath of the Brexit vote shock into the autumn — with no signs of a recovery.

Naomi Heaton, founder and chief executive of property investment firm LCP, which carried out the analysis, said she estimated that the downturn has already cost Chancellor Philip Hammond more than £400 million in lost stamp duty revenues this year alone.

She said: “This is not going to help the housing crisis, it’s just going to mean a lot of new flats are going to be left empty and then developers who feel the pinch are going to stop developing. That’s not going to help anyone. Stamp duty needs to be radically rethought.”

It is not yet clear to what extent the fall in sales has fed through to price drops, in part because the number of transactions are so small.

But one prominent agent, Trevor Abrahmsohn of Glentree Estate, said prices for some homes in the higher levels of the market may now be 30 to 35 per cent below peak levels of 2014.

Latest research from high-end agency Knight Frank suggested that Chelsea prices fell 12.6 per cent in the year to November and properties close to Hyde Park saw an 11.2 per cent drop.

Another ominous sign that London’s luxury property industry is feeling the squeeze came last week when two of the most high-profile executives at Knight Frank abruptly left.

Richard Cutt and Tim Wright, who co-founded the firm’s “super prime” team in 2012 and handled some of the highest value sales seen in Britain, officially “retired” to “seek new challenges”. The move sent shock waves around central London’s estate agency community and was expected to be followed by large-scale job cuts.

There were also growing fears that the stagnation at the pinnacle of the central London market would “ripple down” to more affordable levels elsewhere in the capital.

Rob Perrins, chief executive of housebuilding giant Berkeley, said: “The housing market is an ecosystem — you can’t just damage one end without damaging the whole thing. The recent changes to stamp duty are hitting both the new build and the second hand market. It’s stopping people moving. They’ll result in lower tax revenues for government and fewer homes of every type and tenure getting built.”

Killian Hurley, chief executive at Mount Anvil, which is building several major residential schemes around London including Queen’s Wharf at Hammersmith, said: “The law of diminishing returns is being seen in full effect now — lower tax take, fewer transactions and no meaningful increase in affordable housing supply for Londoners. A lose-lose situation.”

Mike Hussey, the boss of Almacantar, which is redeveloping Marble Arch Tower and Centre Point, said his company was still seeing some demand for high-end homes because there was a shortage in the West End. But he added: “There is no doubt in my mind that aggressive and swift stamp duty changes have had a negative impact.”

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