The prime London market slumped with sales, buyers and prices all down over the last six months, according to Knight Frank.

Top end sales in the capital fell 7% in the half-year to May compared to last year, and the number of buyers dropped 13% over the same period.

Average property prices in prime central London areas declined 2.2% in the year to May, which was the steepest annual drop since last August, the agency’s prime property indices show.

And a quarterly price fall of 1.4% was the biggest in almost five years. But in prime outer London, average prices rose by 1.1% in the 12 months to May.

Lettings stronger

Knight Frank says demand in the prime lettings market is stronger than the sales market.

The number of tenancies above £1,000 per week was 7% higher than the previous 12 months.

And in the super-prime lettings market (£5,000+ per week), the uptick has been even more noticeable, with the number of tenancies agreed in the year to May rising by 15%.

Countries like Italy … have become more attractive.”

Tom Bill, Head of UK Residential Research at Knight Frank, says the clampdown on non-dom tax rules was to blame for the sales slump.

“Under the old rules, individuals could live in the UK without paying tax on overseas income and gains.

“The new regulations limit this to four years and mean their worldwide assets are subject to UK inheritance tax,” he says.

“As a result, countries like Italy, which operates an annual flat tax that ringfences overseas income, have become more attractive.”

And Stuart Bailey, Head of Prime Central London Sales at Knight Frank, says: “Serious sellers, looking to sell in the next year, are cutting their asking prices to attract buyers, whose confidence lies just below the surface.

“Where a property has been listed for six to 12 months, double-digit reductions mean they are selling.”

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