It is extremely disappointing that the government has effectively introduced a new Mansion Tax which will have the highest impact on high value properties in London.
This new, along with stealth income tax, is deeply unhelpful for the housing market in the capital as it deters vendors from wanting to move up the housing ladder and purchasers from buying.
Despite the disruption to the London housing market generated by both the government’s kite flying of proposed taxation initiatives prior to the budget, combined with the new measures actually introduced, buyers, both domestic and international, still want to purchase homes in London. This is because of the cultural, fine dining, retail, educational and other lifestyle attractions the city has to offer.
For example, in the last two weeks in the London ultra-prime housing market there have been £135 million worth of sales across PCL, 11 sales deals averaging £10 million each.
STILL BULLISH
The majority of buyers of both these luxury homes, plus sales of London homes valued above £5 million over the last four months, have been to three distinct purchaser groups who remain bullish about the London property market.
The first group are Middle Eastern purchasers, especially Emiratis from the United Arab Emirates and native Saudis, Kuwaitis and Qataris who are typically a younger wealth demographic, young couples or families aged in their 30s or early 40s, and have a budget of £5 million to £30 million allocated for a London home.
The second group are Gulf based buyers who are not native Emirati or Saudi nationals, but are long-term UAE or Saudi based businesspeople originally from India, Pakistan or UK expats who have made cities like Dubai city, Abu Dhabi or Riyadh their main home.
BIGGEST OVERSEAS BUYER GROUP
Together these Gulf buyers now comprise the biggest overseas buyer group purchasing luxury homes priced above £5 million across Prime Central London, comprising almost 30% of all sales. The final group are buyers from Asia, especially from mainland China.
London real estate has been seen by these Middle Eastern and Asian purchasers as offering good value since property values in their domestic countries such as Dubai, Abu Dhabi and Saudi Arabia have risen dramatically, whilst values in London have remained more stable.
“It’s is driving out businesspeople.”
However, by raising property taxes and other taxes the government risks both deterring these overseas buyers who want to purchase homes in London, but it is also driving out businesspeople and other UHNWIs to relocate from London to lower tax wealth hubs such as Dubai, Abu Dhabi, Monaco and the French Riviera.
The majority of international buyers purchasing homes in Prime Central London are acquiring “holiday homes” for use when they come to the capital for leisure or business meetings.
However what the government should also be seeking to attract is both domestic and international buyers who want to have a London property as their primary home where they live for most of the year and use as their main business base.
GENERATING EMPLOYMENT
Primary home buyers are what really helps to generate employment and investment in London, but with tax rises the government are in danger of repelling rather than attracting these type of buyers who are essential for the long-term economic wellbeing of the UK capital.
Wealthy “holiday home” buyers are of course excellent but London also needs primary home buyers to help generate economic growth and employment.
