London’s Luxury Real-Estate Market: Is The Bubble Bursting?
Tax increase on high-end homes does not make the prospect promising for London's luxury real estate come 2016 and sales are not expected to pick up either.
Savills estate agents made a research and it seems that by the end of the year, the prices at prime locations will fall by 20%. Homes valued at £5 million, or just over $7.6 million will be most affected. Demands also fell by 60% in the third quarter compared with the previous quarter this year.
The Wall Street Journal reports that part to blame on this grim scenario is the increase of stamp implemented this year, duty a tax paid at closing by home buyers.
However, there were arguments made that the high-end market was already slumping down even before the implementation of the new system. It was "looking very over-valued," said Lucian Cook, director of residential research at Savills, which forecasts that 2016 will be a year of zero growth in prime central London, followed by 2% growth in 2017, and a moderate 5% increase in 2018.
The fall doesn't seem to dampen the spirit of everyone, however. Camilla Dell, managing partner of Black Brick, hopes that lower prices will somehow improve sales, "which have really suffered in 2015," she said. "As we saw when prices came down 30% during the financial crisis in 2008/2009, opportunistic buyers start to pile in."
In general, the fall of the prices have caused worry, and many are wondering whether or not the market has become a bubble ready to burst, Money Expert reports. It adds that, "These worries were stoked most strongly by the UBS Real Estate Bubble Index, a study that placed London at the top of a table of capital cities worldwide in terms of bubble risk."
As as response, Lancaster University researchers set out to look into these claims and search for signs of bubbles in regions across the UK and it came to a conclusion that the "slowdown of growth is not necessarily sharp enough to be considered a burst of a bubble, nor is the growth itself necessarily sharp enough to count as the expansion of a bubble."
There is still hope ,after all.