[LONDON] London's luxury homes will slump in value this year after Britain voted to leave the European Union, according to Savills Plc.
Prices for the homes will drop 9 per cent this year, the most since 2008, compared with a zero per cent forecast made in October, the broker said in a report on Wednesday. Uncertainty surrounding the outcome of the UK's negotiations to leave the political bloc will accelerate declines that began when higher sales taxes were introduced last year, Savills said.
Savills, which had estimated values would surge 21.5 per cent in the five years to 2020, cut that forecast to 3.2 per cent.
"Brexit has clearly been a reality check for the high-value end of the market which had already been the most affected by a succession of property tax hikes," said Savills research director Lucian Cook.
"It's difficult to see where upward pressure on pricing will come from until we know the outcome of the negotiations."
Vendors of luxury homes were already struggling to sell their homes after the stamp duty sales tax rose to as much as 15 per cent in April of this year for landlords and second-home owners. Following the referendum, potential buyers will wait to assess how Brexit negotiations proceed and the economic impact if the UK doesn't secure passporting rights to sell financial services into the EU, Savills said.
London's most expensive homes have been the worst performers in central London's best districts in the last five years, the report shows. The value of homes priced at £10 million pounds (S$17.8 million) or more has risen 1 per cent in the period compared with a gain of almost 35 per cent for those priced from £500,000 to £1 million.
There was a three-percentage point increase in stamp-duty sales tax for landlords and second-home owners in April, which followed an increase in the charges for all luxury-home buyers in 2014.
For owner occupiers, the hike means that a 12 per cent tax rate is paid on portions above £1.5 million.