London's market for pre- selling homes dropped by 27 percent in the second quarter due to high prices and sales- tax increase. Broker Chestertons cited a data compiled by Molior London Ltd. and said that this year's presales went down from 7,046 units to 5,109 units at the same period last year.
When the Chancellor of the Exchequer, George Osborne, increased the sales tax for luxury homes last December, the market continued to dwindle because demand for pre- selling homes are already affected by the people's concern in affordability and loan-to-income policies of different lenders. Construction firms are also starting to get worried for they rely on the market's down payment to start and carry on with the construction of homes and its finances.
According to Mark Farmer, head of the residential team at consulting firm EC Harris LLP, "There's definitely some nervousness. There's also an overall sense perhaps that London is just expensive at the moment."Construction firms and developers focus on prime locations that are considered most expensive such as Kensington and Chelsea, in which the average cost of a square foot is more than £1,000. On the other hand, demand is still high for houses located in Canary Wharf, east London's financial district, and in other neighborhoods in the boroughs of Tower Hamlets and Newham.
JPMorgan Chase & Co. analyst Tim Leckie said that most London dwellers are not inclined in buying apartments that costs more than £1,000 a square foot while others can't simply afford it. Battersea Power Station Project may also be affected by the campaigning during the UK national election period.Battersea Power Station Development Co. said through an e-mail that "The uncertainty leading up to the election did result in buyers holding off purchasing until they knew what the fiscal climate would be. Following the election of a stable, majority government interest has certainly increased."
