UK house price: London house prices still under pressure from tax changes, according to Rics

Home sales in the capital fell again last month as London’s housing market continued to feel the effects of tax changes brought in last year.

A survey by the Royal Institution of Chartered Surveyors (Rics) found agreed sales dropped in October with 42 per cent more respondents noting a decline in transactions over the month.

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​Prices also continue to be under pressure in a trend that started in March 2016.

Rics said the trend in newly agreed sales was flat or negative in most UK regions, indicating that the housing market was likely to remain “subdued” in the coming months.

The London property market has been slowing following the Brexit vote and a rise in property transaction tax for expensive homes, introduced by former chancellor George Osborne.

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Buy to let landlords have been discouraged from purchasing properties by a three per cent hike on the stamp duty levied on the purchase of second homes.

The tax change has given more room to first-time buyers, who generally take longer to decide on property. However, the second-hand housing market has also stagnated in the capital as a result.

The survey by Rics found that for homes worth more than £1m, 71 per cent of respondents reported sales prices coming in below asking prices. In July, 67 per cent of respondents said sellers were having to settle for less than the asking price.

In the £500,000 to £1m bracket, 62 per cent said sales prices were coming in lower than asking prices (compared to 57 per cent in July).

Simon Rubinsohn, Rics’ chief economist, said a slow second-hand property market was bad for the UK economy because it restricts mobility.