The world has become a volatile place and the luxury housing market reflects that volatility. Britain left the European Union; its high-end housing market toppled as a result. America saw the slowest running market since 2012, and sales of million-dollar homes dropped.
The value of London homes was hit by increases in property tax, which pushed up buyers' cost, but it was Brexit that slapped the finishing touch. Knight Frank's Prime Central London index fell 1.5 percent two months ago from a year earlier. Kensington, one of London’s 15 most expensive areas, experienced prices that dropped to 7.3 by early August, Chelsea slumped to 7.2 percent, and Notting Hill fell 3.7 percent, according to Knight Frank's London Residential Research.
Knight Frank's head of research, Tom Bill, told Reuters: "Since the vote, a number of buyers have requested discounts due to the climate of political and economic uncertainty." Investors pulled out money from commercial property––that took the greatest hit––but the high-end market suffered too.
"The decision to leave the European Union has provided a backdrop of short-term uncertainty that is affecting behavior in the Prime Central London property market," Bill said.
Foreign investors are holding back, waiting to see what the future holds.
British real estate consultants observed that Britain was experiencing its worst luxury market meltdown in seven years. Some analysts warn that Britain's housing market, in general, and its luxury market, in particular, could see further falling prices in the months ahead.
Oceans apart but sharing the same history and language, the U.S. is going through its own high-end luxury market plight. A CNBC news report from Aug. 31, 2016 reported that oversupply of luxury homes and volatility in the U.S. stock market were chipping sales of luxury homes. Redfin reported that regions worst hit included Miami Beach, where sales of luxury condos fell 21 percent; San Francisco, where prices dropped 11 percent; and Bellevue, Washington, where prices of mansions fell 4 percent. In July, the National Association of Realtors found that sales of homes priced above $1 million fell 4 percent from a year ago. According to Jonathan Miller of Miller Samuel, a U.S. real estate appraisal and consulting firm, "We're seeing very robust activity in the entry space [of the luxury market] and the middle of the market, but we're not seeing it at the top."
Can the U.S. and the U.K. point to some predictive correlation for their luxury housing slump? Brexit. Britain's decision to leave the E.U. rocked both the British and the U.S. stock market, says Lawrence Yun, chief economist for the National Association of Realtors. Investors hung back from buying luxury homes, as a result.
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