While the price of prime property in central London rose by 12.1% in 2011, the high-end estate agent said growth had fallen to 8% in 2012 and would remain flat throughout 2013.
Knight Frank global head of residential research Liam Bailey highlighted the rise in Stamp Duty for prime property and the proposed increased charges on property bought through a company structure as reasons for the slowdown.
“The demand for luxury London homes from overseas buyers looking for a safe-haven for their money, as well as a slice of London life has helped drive price increases.
“The weakness of the pound makes the investment even more attractive, particularly for those buyers who have currencies pegged to the US dollar.
“This growth might have continued into next year, albeit on a more modest basis as prices bumped a ‘natural ceiling’, but government policy is set to have an impact on the market next year.”
Across the UK, average house prices would take another six years to reach their 2007 peak or 2031 in real terms, the report predicted. It suggested house prices would fall by 2% this year before a modest rise in 2014 which would mark the start of the recovery.
Scotland and Wales would experience the greatest decline in house prices this year, while London as a whole would see the least with a 0.6% decline.
London-based Trafalgar Square senior mortgage broker Juspal Nagra recommended those interested in prime London property should consider price changes over the long-term: “The general opinion is that it will probably remain as it is but we do see a climb in the property values around the 5-7 year mark.”
