Annual house prices in prime central London areas grew at their slowest pace in six and a half years in April, as the economic uncertainty and recent tax changes continued to unsettle prospective buyers.
Knight Frank's latest monthly sale index released today shows that although viewings are up by a quarter over the year, the number of prospective buyers has fallen by 10 per cent, suggesting that people are taking longer to make an offer on a property.
The recent stamp duty hike for buy-to-let and second home buyers, on top of 2014's reforms to the stamp duty system, has left buyers feeling more price sensitive.
Vendors are typically lowering asking prices for properties by 10 per cent while buyers are becoming more hesitant, Knight Frank's head of London residential, Tom Bill, said.
“Higher transaction costs are producing the same distortions in the prime London property market as they do with other assets including stocks and bonds. Average holding periods increase, trading volumes decline, prices adjust to some degree and there is a stronger demand for ‘best-in-class’ assets that can be traded more easily," he added.
As a result, price growth slowed to just 0.5 per cent last month, meaning that annual growth has now been lower than five per cent for 16 consecutive months. Prices have fallen by 0.3 per cent over the last six months and remained unchanged on the previous month.
The report also showed that although sales transactions jumped by 50 per cent in March ahead of the stamp duty surcharge deadline, the number then halved in April, highlighting the distorting effect the tax change had on the property market in the period.