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London luxury home values fall for a third month on tax concerns

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Home prices in London's wealthiest neighbourhoods declined for a third month as a potential tax on homes valued at more than 2 million pounds (US$3 million) deterred buyers.

[LONDON] Home prices in London's wealthiest neighbourhoods declined for a third month as a potential tax on homes valued at more than 2 million pounds (US$3 million) deterred buyers.

Prices in the 13 districts that Knight Frank LLP defines as prime central London declined 0.1 per cent in January, the London-based broker said in a report on Wednesday. Values climbed 4.6 per cent on an annual basis, the smallest gain in five years.

The opposition Labour Party has pledged to introduce a "mansion tax" if it wins the national election in May. That's after Chancellor of the Exchequer George Osborne on Dec 3 announced changes to the stamp-duty transaction tax that made it more expensive to purchase homes costing more than 937,000 pounds.

"The prime central London market is operating in an increasingly febrile political environment, where the debate surrounding the merits of a 'mansion tax' frequently takes center-stage," Tom Bill, head of London residential research at Knight Frank, said in the statement.

"In addition to internal divisions within the Labour Party over the feasibility of the tax, further uncertainty surrounds its possible implementation because the likely outcome of the election will be a coalition government."

BLOOMBERG