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(Bloomberg) -- The number of wealthy people granted investor visas to live in the U.K. fell by more than 80 percent last year from the peak in 2014, a sign that luxury home sales in the capital may slump further.
While so-called Tier 1 investor visas rose 12 percent in 2016, the total granted was just 215, according to government data published on Thursday. That compares with 35,000 high-end properties planned for the city.
London’s luxury housing market has been beset by tax hikes, fears of oversupply and political uncertainty. Some developers hoped that the 16 percent fall in the pound since the referendum would help stabilize values in the capital’s best districts, which have fallen 12.5 percent from their 2014 peak as higher sale taxes and the Brexit vote damp demand, broker Savills Plc said in January.
“Weaker demand from Tier 1 Investors, uncertainty due to the vote to leave the EU, and stamp duty changes all mean the central London residential market continues to struggle,” Neal Hudson, founder of researcher Residential Analysts Ltd., said by e-mail.
Applications for the investor visas have slumped since the government doubled the minimum investment required for the permit to 2 million pounds and introduced new money laundering due diligence checks.
That’s hurt demand from overseas. The percentage of homes in central London’s best districts that were acquired by international buyers fell to 41 percent in the three months through December from 60 percent in the previous quarter, according to broker Hamptons International.
Successive increases in sales taxes are the main cause of falling home values in London’s most expensive areas, broker Knight Frank said earlier this month. The government brought in a 3 percent levy on second-home purchasers and landlords in April 2016, having earlier increased charges for all luxury-home buyers in December 2014.
London Central Portfolio, a property investment adviser, said in November that a weak pound had compensated for higher taxes and increased the appetite for residential investment. John Mulryan, U.K. managing director at Ballymore Group, which is developing apartments near Battersea Power Station and Canary Wharf, said in October the decline in the pound was attracting more overseas buyers.
While the cheaper properties may still prove tempting to landlords based overseas, it’s not yet been enough to convince them to buy. Home sales in London’s most expensive postcodes were 11 percent lower in the fourth quarter compared with a year earlier, data compiled by researcher LonRes show.
The falling pound is also causing owners to avoid offering homes for sale, damping sales volumes.
“There’s a pitiful paucity of homes coming up for sale and that’s because nobody wants to sell when the chips are down,” Roarie Scarisbrick, a partner at broker Property Vision, a company which advises buyers of luxury London homes, said in a telephone interview. “Owners who are dollar-denominated don’t want to take possession of a whole bunch of pounds at the moment.”
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