Knight Frank has become the latest high-end agency to admit that the prime central London market is in the doldrums, with the lowest annual price growth since the depths of the downturn six years ago.
Last week Savills blamed stamp duty for the weary prime London market and now Knight Frank echoes that sentiment, saying annual price growth has declined to 1.3 per cent, the lowest rate since October 2009
More worryingly still, there has been a 34 per cent collapse in the number of prospective buyers although this has translated into just a four per cent drop in viewings.
It says rising transaction costs - in other words, stamp duty - have sparked a "flight to quality", a term often used by Knight Frank to indicate that only the best-in-class and most expensive units are selling as well as before.
“Underlying demand remains strong but buyers have become more circumspect and stringent in their requirements due to the stamp duty increase. This heightened price sensitivity among buyers has resulted in a flight to quality, meaning demand is particularly strong for properties in the best condition and on a prime floor, street or square" says Tom Bill, Knight Frank's head of London residential research.
“So, while the anticipated gear change materialised as summer moved into autumn, there was no sense the market is entering full-blown recovery mode after what has been a subdued 2015” he concedes.
Knight Frank says stamp duty is also have a detrimental effect on the prime property market outside the capital, despite its own calculation that prime country house prices increased by 0.7 per cent in the third quarter of 2015 taking the annual price growth for this niche sector to 2.7 per cent.
“With such an imbalance in market values between London and country prices together with the surprise Conservative victory in the general election, we all expected much more activity" admits Rupert Sweeting, head of Knight Frank's country division.
"The two stumbling blocks have been the introduction of higher rates of stamp duty which means that at £10m, a buyer may be paying a further £1.2m on top. This combined with the new tax regime being introduced through the Finance Act has caused many to put on hold their buying plans until they have digested the minutiae" he says.