Since the financial crash London house prices have boomed significantly and left the rest of the country in its wake.
However, we can report that house prices are set to grow more strongly outside of London for the first time in years, according to a new survey.
Since the financial crash London house prices have boomed significantly and left the rest of the country in its wake.
The combination of foreign cash buyers and wealthy billionaires from Russia, the Middle East and China has fuelled big growth.
Prices have rocketed by more than 10% making the capital more of a global island and disconnected from the rest of the country.
But the tide is beginning to turn according to new authoritative research from respected thinktank, the Centre for Economic and Business Research.
The CEBR’s housing market analysis predict house prices will grow 1.5 per cent across the UK this year despite a drop of 0.6% in January.
But prices in the capital are set to drop sharply, facing a 3.6 per cent decline as a series of tax and regulatory measures bite.
This may reflect the impact of stamp duty changes. In December the Treasury overhauled stamp duty by ending the so-called slab structure.
This meant stamp duty was only levied at higher rates above certain thresholds rather than the entire amount. For example, under the old system homes worth more than £125,000 were liable for stamp duty and paid 1 per cent on the total value so £1,250.
Under the new system the 1 per cent charge only applies above £125,000 so a home worth £130,000 only pays £50 stamp stamp duty on the £5,000 over the threshold.
It is a fairer system for many and reduces the tax bills for millions but the new burden falls on higher valued homes.
Property worth more than £2m now faces a stamp duty tax bill of 12 per cent above the threshold. It means multi-million pound homes face enormous tax bills. That uis also having a dampening effect on the London housing market and will casue price drops, say the CEBR.
Furthermore the CEBR says foreign owners are losing interest on the capital when faced with growing hostility from UK politicians and a slowing market. As the taxes bite the foreign investment is turning away and it will drive down prices in the country’s biggest city.
The CEBR is more optimistic about London’s future though, predicting a return to growth in 2016 with 2.7 per cent before rising 6 per cent in 2017, 5.5 per cent in 2018, 3.8 per cent in 2019 and 2.7 per cent in 2020.
UK prices are expected to grow by 2.3 per cent in 2016, followed by 4.3 per cent growth in 2017, 3.8 per cent in 2018, 3.6 per cent in 2019 and 4 per cent in 2020.
