Editor's note: This brief was summarised by The Property AI Newsroom from a report by PropertyWire. Read the original article for full details.

Prime London Property Market Faces Uncertainty Amid Policy Proposals

The prime London property market is facing a period of political uncertainty following Prime Minister Andy Burnham’s recent speech on housing policy proposals. Analysis from Knight Frank highlights declines in both prices and transaction volumes in prime central London, while the sector awaits further policy details.

Prime Minister Burnham’s address included proposals for potential capital gains tax reforms, replacing stamp duty and council tax with a land value tax, a large-scale social housebuilding programme, and greater devolved tax-raising powers. However, no detailed policy proposals have been published, leaving the property sector uncertain about which measures may be implemented.

Prime London Market Trends

According to Knight Frank, the prime central London (PCL) market recorded an annual price decline of 3.6% in June for the second consecutive month. Transaction volumes in PCL fell 14% in the year to June compared to the previous 12 months, while the number of offers made declined by 4% over the same period.

Prime outer London showed greater resilience, with average prices falling 0.4% in the year to June, returning to June 2022 levels. Transactions in prime outer London declined 7% year-on-year, but the number of offers made increased by 5%.

Broader Market Impact

The wider UK housing market also showed signs of pressure last week. Mortgage approvals fell 14.8% to 56,205, marking the tenth largest monthly decline since records began in 1993. HMRC data showed transaction numbers fell 2% between April and May, indicating the absence of a seasonal spring increase.

Knight Frank attributed recent declines primarily to the Middle East conflict and associated mortgage rate rises, though noted that energy prices are stabilising as both sides move towards a ceasefire.

Policy and Sector Response

The uncertainty follows Labour’s previous commitment to deliver 1.5 million homes, a target that has not been achieved. The government also faces fiscal constraints, highlighted by a reported £4.7 billion shortfall in the Defence Investment Plan. The property sector is now awaiting the autumn Budget for clarity on policy direction, while lending activity in London continues amid the uncertain environment.