March 30, 2010
Slower rise for London luxury-home prices
Prospect of lower bonuses for bankers, increased taxes for higher earners cited
(LONDON) Luxury-home prices in central London increased at the slowest rate since a recovery started a year ago on the prospect of lower bonuses for bankers and increased taxes for higher earners, Savills plc said.
The average value of houses and apartments costing more than £1 million (S$2.1 million) increased 3 per cent in the first quarter from the previous three months, according to the London-based property broker.
Prices gained almost 17 per cent from the year-earlier period, when an 18-month slide ended.
'Some of the heat has come out of the market,' said Yolande Barnes, head of residential research. 'We've also yet to see any significant influx of bonus money, suggesting buyers are still keeping their options open.'
The British government announced in December a one-time 50 per cent tax on bonuses exceeding £25,000 paid to bankers in the current fiscal year. This was in response to the outcry over their compensation following state bailouts or aid that enabled banks to weather the financial crisis.
Ms Barnes predicts that prices will decline one per cent this year, following an 8.8 per cent gain in 2009, as the fragile economic recovery and higher taxes on luxury properties damp buyers' appetite to buy homes in neighbourhoods like Chelsea, Kensington and Belgravia.
For properties worth more than £10 million, prices were 6.8 per cent higher than a year ago. 'This sector of the market was far more resilient in the downturn, growing throughout most of 2008,' Savills said.
Next month, a 50 per cent tax on earnings exceeding £150,000 also takes effect and the governing Labour Party will be campaigning to win a fourth term in legislative elections that must be held by June.
Chancellor of the Exchequer Alistair Darling last week announced that the property transfer tax, known as stamp duty, for homes costing more than £1 million will be lifted to 5 per cent from 4 per cent starting in April 2011.
'With the expectation of a second, more unforgiving Budget later this year, activity is already noticeable lower as buyers wait to see how the wind blows,' said Charlie Ellingworth, founder of Property Vision, the unit of HSBC Private Bank that advises wealthy buyers.
Martin Koh/ Sherry Tang