London house prices drop, but will the Autumn Budget bring more uncertainty?

The London property market seems to be having a summer slump, with fewer buyers putting in offers on houses in June and July. This could be good news for anyone wanting to buy a posh pad in the capital, as prices are starting to drop.

Knight Frank, the estate agents, say the number of offers they saw in June was 19% lower than the average for the past five years. July was a bit better, but still 6% lower than usual. They think people were holding back because they were waiting to see what would happen with interest rates and the general election.

But don’t think London’s housing market is down and out! Despite the summer slowdown, the number of homes actually being bought and sold in June and July was still higher than average – up by 8.4% compared to the last five years. This suggests there’s still plenty of life in the London market, with buyers keen to move before interest rates rise further.

However, if you’re thinking of splashing out on a luxury penthouse, you might want to hold your horses. Knight Frank warn that the Chancellor’s Autumn Budget on October 30th could throw a spanner in the works.

There’s talk of new taxes that could hit those buying expensive properties, including making private schools pay VAT from January. Plus, changes to things like inheritance tax and capital gains tax could also scare off wealthy buyers.

And the price drops are already being felt in some of London’s most exclusive postcodes. The average price of a prime home in central London has fallen for three months in a row, and is now 2.4% lower than this time last year. Prices are now 4.5% lower than before the pandemic, and a whopping 17.6% down from their peak back in 2015.

Outside of central London, things aren’t quite as dramatic, but prices have still dipped slightly. The average price of a posh pad in these areas is now 0.4% lower than a year ago. That said, they’re still pricier than before Covid hit (up 3%), but still 7.6% lower than their peak.

So, what does the future hold for the London property market? It’s a bit of a mixed bag. The economy seems to be picking up, which should mean more people feel confident about buying a house. But those new taxes could really put the brakes on things, especially at the higher end of the market.