Fears over luxury property bubble spread to City as flat prices slashed

News at Astons London | 07/04/2016

Fears are growing that the once-derelict Docklands district could become the latest victim of a hike in stamp duty and uncertainty over Brexit deterring both British and foreign buyers.

London-based JR Capital, which buys properties for Middle Eastern investors said it is increasingly being offered property bargains.

JR’s director, Michael Ferris, told the Standard: “We have been offered discounts of up to 20% if we buy flats in bulk off plan for investors, and for some individual homes costing £7 million and above we have seen 30% come off the asking price.” 

Discounts are partly in response to a glut of new homes in Canary Wharf, with thousands under construction.

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Investors are also being put-off by the new 3% additional stamp-duty rate on property bought as a second home or buy-to-let. As a result, estate agents are having to work harder to sell in  the area, according to Adrian Owen, residential head at BNP Paribas Real Estate.

“It’s not like shelling peas for them anymore,” he said. 

“Property developers are allowing agents to put more incentives in place to seal deals, such as agreeing to cover stamp-duty taxes or being more accepting of price negotiations.”

A spokesman for Canary Wharf Group pointed out that any property discounting on Isle of Dogs is not located at Canary Wharf.

He added: “In line with other industries, the property market is not immune to either political or economic uncertainty. However, the values of homes at the next phase of Canary Wharf reflect the very high specification of the apartments and their prime location, delivered by a high quality developer.

“Sales are progressing very positively with a high level of interest from prospective buyers. Over 80% of apartments at our first development at Canary Wharf known as 10 Park Drive have already sold and we are not considering discounting apartments.”

So far concerns over a luxury property bubble have been confined to south and west London. Institutional investors willing to take 100 flats or more were being offered discounts of around 20%, Bloomberg reported today. A record number of high-end homes are planned in Nine Elms and Earls Court even as demand wanes.

Trevor Abrahmsohn, managing director of upmarket estate agent Glentree International, said: “I know of a handful of residential developers in London who have not sold even one of their new-build flats over the last six months.”