London home presales slump 34% as Brexit woes intensify tax pain

[LONDON] Sales of London homes under construction slumped 34 per cent in the second quarter as the prospect of a vote to leave the European Union damped demand already hurt by higher taxes.

The number of residences sold before completion fell to about 4,600 from 6,974 a year earlier, according to data compiled by researcher Molior London seen by Bloomberg News. A spokesman for Molior declined to comment.

"The approaching referendum added more layers of uncertainty," said Tom Bill, head of London residential research at broker Knight Frank LLP.

"That's adding to the two-year slow down from the December 2014 tax increase, which is still the biggest damping factor."

Demand fell about 23 per cent from the first quarter after the government cut tax breaks for the wealthiest landlords. Home values face a "major shock" as landlords offload properties after the measures which, along with new lending rules, reduce returns to near zero, analysts at Deutsche Bank AG said last month.

There was a 3 percentage-point increase in the stamp-duty sales tax for landlords and second home owners in April which followed an increase in charges for all luxury-home purchasers in 2014.

That hike means that a 12 per cent tax rate is paid on portions above £1.5 million (S$2.67 million).

A record 5,655 homes were completed during the second quarter, the highest since the data was first collected in 2009, the Molior report shows.

BLOOMBERG