The run-up to the UK’s election of a new Labour Party government led by Keir Starmer as prime minister has put price growth for prime properties on a pause that is likely to continue while investor’s take measure of the new government’s policies, according to Savill’s.
“Despite the short odds on a change in government and continued market activity, the general election has resulted in a degree of caution in the market, with some prime buyers opting to wait and see how the events of the next couple of weeks unfold before firming up plans,” said Frances McDonald, director of research at the London-based property consultancy.
“However, the shorter than expected run-in to the general election means there is more opportunity for buyer demand to gain traction over the autumn, once most of the uncertainty is behind us.”
Meanwhile, the new government’s plan to introduce a value-added tax (VAT) on private school fees could have a significant impact on Hongkongers who send their children to study in the UK.
Prices in prime central London dropped 0.4 per cent in the second quarter, compared with the first quarter, and 0.9 per cent year on year, according to the property consultancy. That is among the biggest declines in all of the British capital’s districts and represents an average decrease of £20,000 (US$25,627) in value over the past three months for a property worth £5 million.
Price movements in other prime districts of London ranged from a 0.3 per cent slide to a 0.5 per cent rise quarter on quarter, and from a 1 per cent decline to a 0.8 per cent rise year on year.
Beyond London, prices dropped 0.4 per cent for the quarter and 2.7 per cent for the year, Savills added. These markets saw the strongest growth during the mini housing market boom of 2020 and 2021.
Aside from the new government, interest rates are also a factor in hesitance among potential prime-market buyers.
“Given that everyone is awaiting and expecting a drop in interest rates, investors are taking this time to carefully search for the right investment to jump in when the market turns for the better,” said Adrian Lim, head of international residential sales at Savills Singapore. “Discerning investors are just being cautious and want to ensure that they get the best deal.”
The VAT on private school fees would be another major change to the UK’s tax policy following its recent revamp of the non-domiciled tax scheme. Set to take effect in April, the new scheme will no longer exempt people who are living in the UK but are not considered residents from paying tax on their income and assets in other parts of the world.
The number of students from Hong Kong studying in private schools in Britain decreased by about 4.2 per cent to 7,677 in January from a record of 8,011 a year ago, according to the survey released by the UK’s Independent Schools Council in May.
The proposed levy could lead to price increases for homes near prestigious state schools, Savills noted.
