August 3, 2016 / 10:51 AM / 3 years ago

Central London house prices show biggest fall in 7 years after Brexit

LONDON, Aug 3 (Reuters) - House prices in London’s most expensive areas recorded their biggest fall in nearly seven years in July after the Brexit vote reinforced a downward trend caused by a rise in property taxes, a consultancy said on Wednesday.

Knight Frank’s prime central London index fell 1.5 percent last month from a year earlier, due to the uncertainty created by the June 23 referendum and a rise in property taxes which pushed up prices and brought sales forward to the start of 2016.

“Since the vote, a number of buyers have requested discounts due to the climate of political and economic uncertainty,” Head of London Residential Research Tom Bill said.

“The decision to leave the European Union has provided a backdrop of short-term uncertainty that is affecting behaviour in the prime central London property market,” he said.

Prime central London stretches from Notting Hill and Knightsbridge, home to department store Harrods, in the west to the City of London and Islington towards the north and east.

In Knightsbridge, prices fell 7.3 percent last month, the biggest drop of any of the 15 areas examined whilst the biggest rise was 5.3 percent in the City of London.

Property prices in the capital’s most desirable areas began recording annual declines in the run-up to the vote, according to Knight Frank, but July’s fall is the biggest since October 2009, when Britain began recovering from the 2007-8 financial crisis.

But Knight Frank said that the primary reason for the decline remained changes to stamp duty, a property tax, which raised the amount paid on the most expensive properties and on second homes and buy-to-let investments, key to the central London market.

Commercial property took the biggest hit in the wake of the EU referendum with investors pulling out money from funds, forcing some to be suspended.

But there have been warnings in recent weeks from housebuilders and estate agents that residential property prices and demand could suffer.

Britain’s biggest housebuilder, Barratt Developments , said last month that it might slow the pace of construction to prepare itself for an expected slowdown. London-focussed estate agent Foxtons blamed Brexit for its slump in profits.

Knight Frank said rental values last month fell 3.6 percent in London, a city where many young professionals cannot afford to buy their own homes due to high property prices.

The number of prospective tenants fell 6.8 percent year-on-year in the three months to the end of June, impacted by the vote, it said.

Reporting by Costas Pitas; editing by Giles Elgood

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