It Gets Ugly in the Toniest Parts of London
It gets ugly for luxury homes in the toniest parts of London.
The combined value of homes that were sold in prime central London, which includes Belgravia and Chelsea, plunged 24.5% in 2015, year-over-year, to just under £3 billion, according to real-estate data provider LonRes. Prices edged down 1.4%, but transaction volume collapsed. It was even worse at the upper end: transactions of homes over £5 million ($7.5 million) plummeted 30.5%!
LonRes had already warned earlier in its third quarter report:
It was a London bubble that was threatening to undermine the UK economy, as identified by the Bank of England last year. The old argument of prevailing market conditions just being the natural forces of supply and demand doesn’t wash when the outlier, that is the massive influx of overseas investment, tips rising house prices into overdrive.
New taxes on homes over £938,000 ($1.4 million), based on changes to the Stamp Duty Land Tax system at the end of 2014, caught some of the blame. But it wasn’t the only reason, LonRes said. Other factors include the dearth of wealthy foreign buyers. Russians had been impacted by the collapse in oil prices, and Chinese had been hit by the turbulence in China. And for them, there were other uncertainties:
A popular topic at the moment is the authenticity and provenance of the money used to buy property in prime central London (PCL). To this end, HMRC [the UK government’s tax collection department] has discovered that it is entirely conceivable that some buyers may not have made their newly discovered fortunes in an entirely honest and legal manner. Only a year ago, The Times reported that London was the money laundering capital of the world, and Alexander Lebedev, owner of the Evening Standard, claimed then that £1 trillion had been stolen from Russia since 2000.
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