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Mansion tax fears and stamp duty changes send the world’s super-rich to London’s rental market
Anxieties over the outcome of the 2015 general election and new stamp duty reforms are persuading the world’s super-rich to rent property in London rather than buy it outright, according to a new report.
London’s lettings market has benefitted from a huge bump in prime rentals, with as much as 21 per cent of the capital’s total rental income for the first nine months of 2014 coming from the top five per cent of the market.
According to the report from luxury residence specialist Beauchamp Estates and market intelligence group Dataloft, the “ultra-prime” sector, which includes all properties with rents of over £9,000 per month, generated £102m – a “disproportionately large” chunk of all the capital’s rental income for the period.
London is living up to its title as the UK’s least-affordable city, as the number of “ultra-prime” rentals has grown by 12.8 per cent in the last year.
Furthermore, the even more expensive “super-prime” lettings market, which includes all properties charging £83,000 or more a month and might include a four bedroom 5,000 sqft Mayfair penthouse, are also being snapped up.
Beauchamp Estates says the plush pads tend to be taken up by “ultra-wealthy continental Africans, Middle East tenants and Russians/CIS, who have made their wealth from oil, gas investments or commodity”, and can be found in Mayfair, Knightsbridge, Chelsea, South Kensington, Notting Hill, Regent’s Park, St John’s Wood and Holland Park.
Mansion tax fears
Land Registry records show that the average price of a home in England costs just £177,299 – so why are the world’s wealthy frittering away their fortunes (albeit probably very slowly) on rent when they are lucky enough to be in a position to buy a house with ease?
According to Beauchamp Estates’ managing director Gary Hersham, prospective buyers are being put off outright purchases by worries that next year’s general election could lead to a Labour victory and the subsequent introduction of Ed Miliband’s mansion tax which would tax all properties worth over £2m.
However, Hersham added that the reforms to stamp duty announced by George Osborne in this year’s Autumn Statement, would also hit the top five per cent of the housing market.
He said:
On the day of the stamp duty changes, prior to the midnight deadline, Beauchamp Estates fast tracked sales deals worth £100m for clients.The UK’s multi-million pound housing market is largely concentrated in Prime Central London and wealth pockets in the Home Counties, this is where stamp duty changes will be felt most strongly. It is in London’s £3m to £10m price band where the changes will have the biggest impact, here the market will almost come to a halt.
Last week estate agent Winkworth also took aim at Labour's Mansion Tax plans, arguing that the potential of a Labour victory at the general election was hitting demand for £2m-plus homes and making London less desirable to international buyers.
Implications for the rest of us?
While rental prices for London’s luscious and luxurious properties may be rising under increased demand, the rental market in the city as a whole may actually be experiencing a reduction in prices.
According to data from HomeLet, the average rental price (calculated as a mean) in London actually dropped by 3.8 per cent between September and October this year.
The Office for National Statistics’ experimental rental price index recorded a 1.5 per cent rise between August and September.