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Prices for the super-rich are still soaring upwards

By Liz Rowlinson

NEVER has there been so much speculation about the construction of a block of flats as that surrounding One Hyde Park, London’s most expensive apartment complex.

And as the block rises opposite Harvey Nichols in Knightsbridge, it is impossible not to imagine what a flat costing £80 million to £100 million will look like.

What we do know is that the penthouses are designed by Richard Rogers and will come with top range security (panic rooms and bulletproof windows), high-class services (supplied by the Mandarin Oriental hotel) as well as a prime location.

It’s easy to wonder — in the week when Nationwide Building Society announced that house prices are falling at the fastest rate since the last recession — how the troubled market is affecting such a lavish project, especially when new-build flats have been the hardest hit.

Well, One Hyde Park — where 40 of the 80 units have been sold, with average prices of more than £20 million — presents itself as proof that the top of the market is still going strong.

The international moneyed oligarchy (a third of buyers come from Russia, a quarter from the Middle East) have raised London’s status as a capital of the super-rich, with the most billionaires in Europe.

Looking at the wider super-prime London market, latest figures released by Savills show that while properties in the £5million bracket have ‘flattened’, those worth £10million plus have actually increased by 1.2 per cent.

‘We’ve had 16 sales

in June alone from £5.3 million to £70 million,’ says Jonathan Hewlett, director of Savills, which is selling fourbed apartments at a prestigious new development, 21 Chesham Place in Belgravia, for £15.9 miliion to £40 million.

Other addresses attracting interest from the super-rich include The Knightsbridge (a luxury development near One Hyde Park) Lennox Gardens and Cadogan Square.

Last month, Palace Green, a fourstorey house in Kensington, sold for a world-record-breaking £117 million to steel magnate Lakshmi Mittal. Britain’s richest man — worth a reported £50 billion — is unlikely to be affected by interest rates on highstreet mortgages, neither will the 20 people looking for properties of between £20 million to £100 million on the books of Aylesford, the company who handled the Mittal sale. ‘The demographics of London haven’t changed in the past six months. There wasn’t a big exodus of non-doms, so there are still no sellers and too many buyers,’ says Aylesford’s chairman, Andrew Langton.

His comments are echoed by Camilla Dell of Black Brick, a property-finding agency whose average sale has shot up from £2 million to £6 million this year.

‘Prices are being driven up in the £10million-plus bracket because of the shortage but also because sellers at that level never need to sell if they don’t get the right price,’ she says.

Outside London, the market is equally active and — according to Mark Lawson of The Buying Solution, which sources estates for the super-rich — there can be a feeding frenzy for the right property.

‘A country estate — a good-looking Georgian country house, in plenty of countryside, near a nice village — is a stronger aspiration for the selfmade man than it was five years ago,’ he says.

Perfect for such a man might be an 11-bed ‘Palladian style’ mansion near Stratford upon Avon, on sale for almost £11million through Quintessentially Estates. This comes with 35 acres, four-car garage, ballroom and ‘Versace-inspired’ decor.

Experts divided on timing of UK deals

To buy or not to buy? That is the question many Hong Kong investors watching the British property market’s slide are asking themselves.

Most property professionals say the answer to the question is buy – although some warn the downturn has years to run.

Latest data shows British property prices continuing to fall. According to the Land Registry, residential property prices fell 0.2 per cent in April – the eighth monthly fall in a row.

In London, Charles Oliver, a director of property finder Chesterton Private Clients, recommended potential buyers take the plunge. “Vendors are becoming more realistic about prices and for anyone thinking of buying now there could be some good opportunities,” he said.

Some Hong Kong investors appear to be doing just that. “There is still good appetite for London property,” said Andrew Jones, a partner at estate agency Knight Frank. “People in Hong Kong still see London as a premier international market.”

Camilla Dell, the managing director of property finder Black Brick, said investors were right to enter the market now because bargains were available.

“Whilst there has been a downturn in prices, property is a medium to long-term investment, over five to 10 years,” Ms Dell said. “Predicting when the market will bottom out is impossible and at the moment we are able to negotiate very aggressively.”

By pinpointing those vendors desperate to sell she was able to knock 11.5 per cent off asking prices on average, she said. The sellers included financiers who had lost their jobs because of the credit crisis, and developers whose finances were overstretched.

But Lucian Cook, a director of residential research at Savills estate agency, said buyers ought to take into account the prospect of prices falling in the future if they bought now.

“As things stand the downturn has not worked its way through the system yet and more has to come,” Mr Cook said. “You would have to say this is particularly the case in prime central London and the new-build sector and we believe prices will fall 10 per cent in prime central London this year.

“Here on it depends on what is happening in the economy, because if the credit crunch gets worse and the economy worsens, then we could have a more prolonged downturn than we were anticipating.”

However, buyers of the country’s most luxurious homes had less to worry about because values for these super-prime properties were continuing to rise, said Mr Cook.

Savills forecast prices would increase 3 per cent for homes valued at £4 million (HK$61.25 million) or more this year, because of strong overseas interest.

Robert Hadfield, the managing director of investment property management company Pineflat, urged caution. “We would definitely advise Hong Kong buyers to sit on their hands at the moment. Although it is definitely a buyers’ market, I don’t feel that there are any real bargains out there yet.

“I feel that there is an additional vulnerability in that many Hong Kong buyers like to buy high-yielding flats to get the maximum weekly rental. This strategy leaves landlords at risk and although I keep reading about the buoyant rental market, our experience is that rental property is only letting quickly if keenly priced.”

But for the moment Hong Kong owners of British property had not been spotted among vendors desperate to sell, agents said.

Rich international buyers continue to underpin London residential property market

Rich international purchasers continue to underpin the London residential property market, according to Black Brick LLP, a specialist search agent that often works with private banks to source property for clients.

Data collated by Black Brick, since its inception in January 2007 provides an interesting perspective of the dynamics of the market in central London, especially since the inception of the credit crunch and concerns about the UK’s new resident non-dom regime.

The average budget of Black Brick’s clients has increased risen from £1,649.870 in 2007, to £5,590,000 in 2008, according to Camilla Dell, Black Brick’s managing director. According to Ms Dell this is a sure sign that the top end of the London property market is still very active, with high net worth individuals, particularly international buyers, not affected or deterred by the economic climate or the new resident non-dom regime. Indeed, so far this year Black Brick has dealt exclusively with the international clients that accounted for just 79 percent of its list in 2007.

The start of 2008 saw owner-occupiers dominating the top end of the market (100% of concluded deals), with no interest from investors. But investors look set to re-enter the market with Black Brick instructed by several investment clients to buy sizeable property portfolios, ranging from £10 million to £15 million in size. Investment clients now constitute around 50 percent of Black Brick’s current list, an increase from the 39 percent during 2007.

“We have been very encouraged by our figures to date,” said Ms Dell. “It demonstrates a clear need for our services and an appetite for London property even in a weakening market, particularly from investors who see it as an opportunity rather than a deterrent.

“The biggest casualty in the property market in 2008 has been the volume of sales transacted – with vendors digging their heels in on price and buyers offering 10 percent to 20 percent below asking price,” she continued.. ”We forecast that this will continue into the latter quarters of 2008. We expect to see a further softening in the market and will continue to make strategic acquisitions for our investment clients on an opportunistic basis.”

Prices for designer homes in London are going through the roof thanks to creative use of space, quality materials and craftsmanship

By Richard Warren

Wealthy international buyers are paying the highest prices in the world for London’s designer homes.

Top developers, designers and architects carry as much cachet in the minds of luxury home buyers as top designer labels, and their creations have price tags to match. Brands are being created, not just homes. Sometimes, a home receives a stylish new lease on life; very often, an entirely new, branded residential scheme is built.

Designer homes are usually fully furnished with custom-made furniture. This ready-to-move-in aspect makes them particularly popular with overseas buyers.

An ambitious project in the pipeline is the Richard Rogers-designed One Hyde Park in Knightsbridge where Candy & Candy is development manager and interior designer. The Mandarin Oriental Group will provide residents with five-star hotel-style services when the project is completed in 2010.

Sales prices at the project are nudging close to £6,000 (HK$92,522) per sqft, one of the highest in the world. Half of its apartments have been sold for an average of £20million each since marketing started. Eighty per cent of buyers are from overseas.

“People have bought into Candy & Candy because there is comfort in the brand like there is for a Louis Vuitton handbag,” says Camilla Dell, partner of Central London property firm, Black Brick.

Little expense is spared on One Hyde Park’s construction. Its high-spec interiors will be finished with artwork by leading contemporary artists Sam Taylor-Wood, Nadav Kandar and James Turrell.

Other new projects are increasingly lavish and exotic.

At the Halcyon, where the former Holland Park Hotel has been turned into 12 apartments by designer-developer Tusk, an eight metre-long wall in the show flat’s master bedroom is covered entirely in silver leaf.

Until recently, designers Linley and Imagine Private Clients focused mainly on styling flats, such as those at Cheyne Apartments in Chelsea Wharf (SEHK: 0004 <http://www.scmp.com/portal/site/SCMP/template.PAGE/page.company_profile/?companyId=0004.HK&s=business&ss=scmpIR> ). Now, a growing number of firms are refurbishing houses. At the top end of the market, Rigby & Rigby specialises in creating designer family houses, while mainstream developer Weston Homes is introducing more style, having turned a former chapel in Kent into a glamorous home at its Mayfield Grange development.

The cost of bringing these designers’ visions to reality is worth it for developers. Research from estate agency Knight Frank shows the designer touch can add 60 to 70 per cent to the value of a home.

Knight Frank head of residential research Liam Bailey says: “It is not so much the specifications in terms of fancy taps and other accessories that is important, but the designer’s use of space, use of good quality materials and craftsmanship.”

In Belgravia and Knightsbridge, a home can sell for £2,500 per sqft but this increases to £4,000 per sqft for a high-spec property in the same street, his research shows. Prices for apartments at the Richard Rogers-designed Montevetro building in Battersea – a new development – have outperformed the immediate market by 26 per cent since it was completed in 2000, he says.

Mr Bailey expects brand name developments to become even more luxurious.

“New projects in super-prime markets have seen an `arms race’ by developers to `up-spec’ their developments and keep ahead of the competition,” he says.

A Spring Recovery

“There’s more stock across every sector but good properties are still incredibly hard to find. These are apartments on a first floor or above in the best buildings, or houses on the most desirable side of the square or street in sought-after areas,” says Mandy Bissell of Black Brick, a buying agency.

She says estate agents ensure sellers get good prices by asking for “under market value” to encourage buyers. “There may be only three or four interested parties compared to eight or 12 last year but it’s enough to ensure battle commences. The end result is a sealed bid with the property selling for over market value.

Non doms: The nom-dom who will soon be on his bike

Tax changes are creating an exodus of foreign residents. Jessie Hewiston meets one American who has decided to get up and go.

All over London, the bags are packed and the tickets are booked. The ‘For Sale signs’ have gone up and the removal vans are parked out the front. The non-doms are on the move.

Take Mark Roche. The 54-year-old retired architect is leaving London and moving to Spain to escape the effects of the tax changes.

This is just what the Government didn’t want. The Chancellor, Alistair Darling, recently scrapped plans to tax the offshore assets of the country’s 120,000 registered non-domiciles – foreign residents who don’t pay tax in the UK on their overseas earnings.

He is still sticking to part of the taxation shake-up, however, levying a 30,000 annual charge on non-doms who have lived in Britain for seven years and longer. He is also charging Capital Gains Tax (CGT) on UK homes owned in overseas trusts, another change that will hit the non-doms where it hurts.

Whatever tinkering the Government does to the fine detail, it will be too little, too late for Mark. Because of the impeding levy, the CGT changes – and the increase in the congestion charge that means he will have to pay 25 a day to drive his 4×4 out of his garage – he has decided to sell up.

According to Treasury figures, at least 3,000 of the UK’s non-doms, who between them spent 16.6billion in this country last year, are expected to leave when the changes come into force next month. Ask an estate agent, though, and he or she will tell you the figure is far higher. A 30,000 charge may not be too much of a concern to a hedge fund multi-millionaire, but it is to Mark. Raised in California, he ran his own medium-sized architecture company, Mark Roche Associates, until he retired six years ago, selling it on to his former employees. His company specialised in designing shops; clients included Nike, Mango, Herms and Jean Paul Gaultier.

Before going solo, Mark worked with Richard Rogers for eight years. ‘I suppose, out of all the non-doms in this country, perhaps a third are City-boy high-flyers,’ he says. ‘I suspect the majority, though, are like me: small entrepreneurs. I feel I’ve made a good contribution to this country. I have put food on the table for 15 employees, paid tax for them, and I don’t think I would have been in a position to do that had I not been a non-dom. ‘For multi-millionaires, 30,000 is a drop in the ocean.

But to me it is a lot of money. I also have an investment property that I’m trying to sell by April. If I don’t, I’m going to be hit by the new CGT. I can see clearly that any money you save can disappear into the coffers of the Government simply by its changing the rules.’ Mark bought his home in Hewer Street, W10, a 10-minute walk from Ladbroke Grove Tube station, for 625,000 in 2002, just before he retired. The former Unigate dairy was a shell, derelict for more than 20 years. Mark spent 240,000 turning it into his home. It is now on the market for 2.6 million through Marsh & Parsons. The result is striking. The ground floor has a huge living room plus a guest bedroom and bathroom. On the upper floor, a living room with a huge vaulted ceiling, kitchen and master bedroom merge into one another in an extravagant display of the virtues of open-plan living.

There is also a 500sqft office by the front door, which Mark rents out, bringing in 1,050 per month. He also rents out the property for magazine shoots at 1,000 a day. ‘I’m now moving to Spain, which is not the most logical choice, as it’s not a tax-efficient regime,’ Mark says. ‘Many people do it by living there for less than six months a year, so you avoid being domiciled in Spain and subject to its tax. I intend to keep a holiday property in London to visit friends for one month of the year. The other few months I plan to travel. ‘For me, the most important point about being a non-dom is this: you’re not paying tax for elements you will probably never use. A non-dom is someone who does not intend to stay in the UK; they only intend to stay for their business life. ‘When they retire, they are most likely going to leave, and all that tax they pay is then lost because they are not taking advantage of medical facilities or pensions – all the services that older people require. I feel justified that my non-dom status is relevant and that it helps the economy.’ In response to the Government’s proposals, Aylesford estate agency has opened a branch in Geneva to handle property sales for non-doms relocating to Switzerland. ‘Alistair Darling’s U-turn has done little to reassure my clients,’ says Aylesford’s Andrew

Langton. ‘A worrying number of them are non-doms who are still seriously considering moving out of the country. They think London is too expensive to function, capped off by the congestion charge on 4x4s going up to 25. The feeling is that the Government doesn’t want them here. The bottom end of the market is already suffering because of the credit crunch; now the top end of the market is likely to be affected too.’ Camilla Dell, a partner of Black Brick buying agency, believes that her clients are more worried by the CGT changes than the 30,000 levy. ‘I have clients with multiple investment properties in London who, after April, will have to pay CGT, and are planning to sell before then,’ she says. ‘The result will be that we’ll suddenly have a lot of non-doms selling at the same time and there’ll be more choice and flexibility at the top end of the market, something we haven’t seen for the past 18 months.’

Spring into Action – Tips for Experienced Buyers

First, take advantage of today’s buyer’s market, which may allow you time to view and revisit all properties in your price range.

“There are more properties on sale today than this time last year. Therefore buyers can affortd to take longer and be more choosy, ” says Camilla Dell of Black Brick, a professional buying agency.

Second, do your research before making an offer. “Look at the purchase price and then divide this by the size of property to give a “price per square foot”. We look at how the price per square foot compares to similar properties sold in the past six months in that street or block’, says Ms Dell.

“This enables us to assess whether the property is being marketed at market value, bwlow market value or is grossly overpriced. The Land Registry (landreg.gov.uk) allows you to search for details of sales by postcode for a fee. It’s a small price to pay to avoid making a costly mistake and over-paying.’

Third, get your mortgage and a survey arranged, as some sellers will opt for the buyer who is ready to go.

Don’t be too influenced by the new Home Information Pack, which applies to every property on sale. It doesn’t contain the most important item the purchaser needs to make a good decision – the survey. You, the buyer, still need to commission that.

Price-wise, London is streets ahead

London still has the most expensive real estate in the world, with top-whack properties going for twice the price here as in New York, Hong Kong and thriving Moscow, according to research by Hamptons International.

Its study of leading global cities found that the capital can command £4,000 per square foot. Presumably it was put together before the secretive Candy brothers, who make all interested parties sign confidentiality agreements, released figures for 1 Hyde Park, now claimed to be achieving over £5700 per sq ft. New York, at number two, fetches a mere £2025 per sq ft.

“When people become wealthy, one of the first things they buy is property, and one of the first cities they go to is London,” said buying agent Camilla Dell of Black Brick Property Solutions. “There are many fewer Russians out there now, compared to 2006; I have heard they have moved on to Paris. We expect buyers from China to be the next big thing.”

London is even further ahead of UK rivals such as Bristol at £930 per sq ft, Edinburgh at £840 per sq ft and Brighton at £590 per sq ft.

Singular Aspirations

“Women are now arguably being paid as much as or more than men in the professional world. Successful female bankers, hedge fund managers and saleswomen – particularly women in property – are creating a new single woman status, “says Camilla Dell of London based Black Brick Property Solutions a home search firm. She first noticed single women making their mark on the market about five years ago and says that increasingly they are looking for the “same things as men – a cool pad with space where they can entertain their friends and have dinner parties.” Why? The answer is simple. “Women are staying single for longer and are empowered to buy on their own and own the ultimate female bachelor pad”. Says Dell

Dell agrees that security is definitely more of a female issue. “We don’t often get men asking about it.” She says “Women are more likely to want to be in the centre (of town) and somewhere that feels like a safe location and they are led a lot by friends. They are also more likely to want to be on the second or third floor.”

Where women do tend to be different from men is in the emotional attachments they form with their homes, both in terms of work and investment “Women are not afraid to buy properties in need of work,” says Dell. “if a property is in need of a little light refurbishment, women are much more likely to take this on and see it as a way of making their mark on a property than men, who are more inclined to buy a finished product that they move straight into.”

London Luxury-Home Prices Gain as Foreigners Seek Reduced Risk

Luxury-home prices in central London rose the most in 10months as overseas buyers seeking the safety o f one of the world’s most resilient property markets propelled demand, Knight Frank LLP said in a report today. Values of houses and apartments costing an average of 3.7 million pounds ($5.9 million) gained 1.1 percent in March from a month earlier, the London-based broker said. Prices have been rising for three years and are 10.1 percent above the previous peak in March 2008, before the global financial crisis, said Liam Bailey, Knight Frank’s head of residential research.

“Pressure on price growth and new demand is coming from overseas,” Bailey said by telephone. “People are in danger of underestimating the amount of foreign interest in London as a property market. That’s what keeps things moving.”

Investors from overseas are buying central London homes to preserve wealth amid political and economic tensions in their home markets. Prices for the best London homes have continued to rise despite the U.K. coalition government’s plan to curb tax avoidance on luxury-home sales and calls for a mansion tax.

London luxury-home values rose 11.3 percent in the year through March 20, the smallest 12-month gain since August, according to Knight Frank. The affluent Kensington and Chelsea districts helped to push the asking price of a London home to a record this month as average values broke through the 2 million- pound level for the first time, Rightmove Plc said this week.

Home prices in Britain overall rose 0.1 percent in February, the U.K. Land Registry said March 19.

Mansion Tax

Chancellor of the Exchequer George Osborne will attack tax avoidance on property transactions to day in his budget, which he says aims to help low-income workers. Osborne is trying to win the backing of his coalition partners, the Liberal Democrats, who are seeking a tax on expensive homes.

Osborne probably will seek to curb the practice of avoiding stamp-duty payments by using offshore
companies to buy a home, said Yolande Barnes, residential research director at Savills Plc.

Stamp duty is a residential real estate transaction tax of as much as 5 percent of the price of homes worth more than 1 million pounds. Closing some loopholes is unlikely to curb demand, according to Black Brick Property Solutions LLP.

“This practice remains rare and any potential stamp duty saving is normally seen as a bonus, rather than a driver of price,” Camilla Dell, managing partner at Black Brick, said in a separate report.

Equity Rich business secretary Vince Cable, a Liberal Democrat, has said that the threshold for the levy should be for homes valued at no less than 2 million pounds. A tax at that level won’t deter foreign buyers and may target those on low incomes who are equity rich, said David Adams, a managing director for property broker John Taylor. “Accountants will use clever schemes to help the wealthy avoid paying it,” Adams, who is trying to sell a house in Kensington for 18 million pounds, said by phone. “It will fall upon many elderly retired people who happen to live in central London.”

Knight Frank compiles its luxury-homes index from its own appraisal values of a sample of the same
properties in the 13 most expensive neighborhoods o f central London, including Belgravia, Kensington and Knightsbridge.

“The rising level of speculation over a potential mansion tax or new wealth taxes appears to have failed to dampen demand for prime London property,” Bailey said in today’s report.

The forecast for the prime London market? That depends on which part…

Forecast season may be upon us, but headline figures are of little use in the micro-markets of prime London, says Camilla Dell…

As we approach the year end, the UK’s leading agents and property analysts have the tough job of predicting the outlook of the property market. This year, their job is tougher than ever as the UK market faces extreme uncertainty as a consequence of the Brexit vote. Not only will the terms of the UK’s relationship with the EU have a profound effect on the country’s overall economic performance over the next few years, but the treatment of the financial sector will bear particularly on the London property market.

The collective response to this uncertainty is expected to be inaction, with both JLL and Savills predicting no growth for Prime Central London (PCL) in 2017. This is followed by a growth of 15.2% and 20.8% respectively over five years to 2021. Although we largely agree, we caution the usefulness of a single number for such a heterogeneous market as prime London. As we have seen in the past, just as some geographic areas have performed better than others; some parts of the market are likely to outperform the average.

For example, we expect the lower end, below £1 million, to remain active and resilient, supported by government programmes, such as Right to Buy. Furthermore, the current stamp duty regime continues to make properties at this end of the market relatively attractive to investors. This implies that outer prime locations are likely to do better than a more traditional – and more expensive – PCL.

There will also be outliers at the higher end of the market; we’re seeing stock dry up as vendors refuse to countenance the discounts needed to close deals. This can have effects in both directions; those sellers which come to the market are likely to be highly motivated to sell, and open to offers, while limited supply can see buyers pay up for high quality properties.

For the opposite reason, we remain very cautious on the new-build segment, which we think is still the most vulnerable part of the market. Some parts of London are flooded with supply and we’re likely to see properties offered with substantial discounts.

Of course, there is a near-term wildcard, in the Chancellor of the Exchequer’s Autumn Statement, due on 23 November. Budgets under George Osborne delivered raid after raid on the property market and we don’t know what – if anything – Philip Hammond has up his sleeve.

Mum and Dad rent a different class of digs

By Carol Lewis

The average cost of student digs across the country is about £88 a week, although in some areas of London parents are paying almost 100 times that to secure the best luxury accommodation for their offspring.

James Thornett, the head of lettings at CBRE Residential, says that parents are paying up to £7,000 a week for “super-top end” three to five-bedroom apartments with a concierge, gym, spa and games room. This year 42 per cent of the estate agency’s lettings in Covent Garden have been to students — compared with 21 per cent last year.

“Many are postgraduate students studying business or management at the London School of Economics or University College London. Two thirds of them are from overseas and will have funds from mum and dad. They are security conscious and tend to want to live in a secure part of town with a 24-hour concierge. They are looking at super-prime properties — a far cry from the stereotypical student digs,” he says.

Thornett says that 10 to 15 per cent of the wealthy students he rents to will not have visited the property before they arrive for university, either trusting in virtual reality or video tours. “Often they will pay the whole year’s rent in advance to secure the tenancy and it is usual to start paying rent in June even though they won’t arrive until September for the new term — such is the competition for the best places,” he says.

Often students will want new-build properties or newly renovated places and some will request a “nanny annexe” in which a bodyguard can live. This is despite the increase in private student halls, many of which offer students a higher quality of digs than seen before. According to the website Accommodation for Students, 287 private halls opened in Britain this year, with students in London paying £264 a week on average, or £129 a week for private rental accommodation. Zone 1 is the most expensive area with an average cost of a studio in private halls of £429 a week. The average weekly rent for all properties within Greater London was £395 in September according to Countrywide, the estate agency.

Last month one student accommodation provider, Hello Student, announced that it was teaming up with the Conran Shop to offer luxury furnished “executive studios” to students in Cardiff costing from £233 a week.

Yet despite the high rents some parents are paying there is a lack of property available to students. “Some landlords are cautious about renting to students but we have to think beyond [the 1980s sitcom] The Young Ones image of students partying every night and ruining the place. They tend to leave the place immaculate and rarely, if ever, do we have to deduct anything from the deposit,” Thornett says.

A two-bedroom flat at Merano Residences, on Albert Embankment in London, is to let for £1,125 a week with CBREA two-bedroom flat at Merano Residences, on Albert Embankment in London, is to let for £1,125 a week with CBRE.

Other areas of London popular with wealthy students include South Kensington, near Imperial College London and the Royal College of Music, and St John’s Wood and close to Regent’s Park for the London Business School.

Camilla Dell, a managing partner of Black Brick, a buying agency, says that she has seen an increase in international rental tenants including students. Many have decided against buying because of the increase in stamp duty, the abolition of capital gains tax and inheritance tax breaks for foreign buyers, and the uncertainty caused by Brexit, which means families are less sure that their children will live and work in London after graduating than they were before the referendum.

She says that most of her clients are looking to spend between £700 and £1,000 a week, with safety the key concern — so a 24-hour concierge or porter is a must-have. They also tend to want a one-year tenancy with the option of renewing for the final two years of their course.

Martin Bikhit, the managing director of Kay & Co estate agency, says: “We have seen a spike this year in wealthy students renting, but also in parents buying for their children. Often they are planning years in advance, buying property three to four years before the children need it and renting it out in the meantime. They will buy two to three-bedroom apartments so that siblings can share. Marylebone is particularly popular for its proximity to the London Business School and London College of Fashion. They tend to spend from £800 a week upwards on rent.”

Thornett says that, of his clients, 80 per cent of parents will pay for children to rent while the rest will buy for them. “More than a couple of times we have had parents plan for children who are eight or ten years old. They are buying property for the child to live in in ten years’ time. They treat it as an investment. There is also a small percentage who will start out renting and will then buy.”

Are Americans coming to rescue London’s ailing property market?

By Isabelle Fraser

Many Americans would have us know that they “saved” us from the Germans in the Second World War. As we approach the 75th anniversary of the Normandy Landings, I’ll leave that heated debate for another day.

But now they might be coming to save us from something else: our sluggish property market.

Buying agent Black Brick reports that there has been a big jump in the number of Americans wanting to buying property in the most expensive areas of central London, accounting for nearly one third of its clients in the year to June.

These American buyers can now get a 40 per cent discount on what they might have paid at the top of the market. Property prices in many areas of prime central London have fallen 15 to 20 per cent, and they have the exchange rate behind them too: in July 2014, the pound was worth $1.71, but in the last two years it has traded between $1.27 and $1.43.

“Our US clients are not put off by Brexit or the threat of a Corbyn government; instead, they view the market as a good buying opportunity,” says Camilla Dell, of Black Brick.

“Our largest transaction for a US client – more than £20 million – was because he had decided to relocate to London and run his technology business from here. After Silicon Valley, London is the next best place for IT entrepreneurs. We have the infrastructure and talent to be able to support companies like this.”

These buyers are largely coming from New York, LA, San Francisco and Chicago, as well as a few from Houston and Dallas, according to Berkshire Hathaway HomeServices Kay & Co. They’re prepared to pay upwards of £10 million on average, looking in Marylebone, Hyde Park and King’s Cross, and for larger family houses in Mayfair, Belgravia, Hampstead, Notting Hill and St John’s Wood.

It fits in with a general picture of returning health for the high-end market, too. Knight Frank said earlier this month that the number of offers made (not just by Americans) for these pricey properties in the first three months of this year was the highest in more than 10 years. The level of new buyers was also at the highest figure since 2014, when prices were at their peak.

Transactions have increased in prime central London among homes priced under £1m, between £1m and £2m, and over £5m, according to LonRes. It’s the market for homes between £2m and £5m that is suffering the most, where the level of sales continue to fall.

So what’s changed? Political uncertainty remains, albeit in the background. Sky-high stamp duty, which decimated the market four years ago, is still a major factor. It’s a more imperceptible shift of momentum: a mixture of sellers’ increasing realism combined with buyers getting bored of waiting to see what happens with Brexit.

But it’s not all sunshine after the storm in the prime central London market: there’s been a 39 per cent fall in the number of new properties listed in the first three months of the year, compared with the same period in 2018.

That’s proving to be one of the biggest problems for the ultra-rich, as there aren’t enough suitably high-end, ultra luxurious properties to buy.

Brexit bargains: London’s luxury homes take big price cuts

Wealthy buyers are benefiting from political uncertainty — especially if they are paying in dollars

Five-bedroom house in Belgravia has cut its original asking price by £1m to £8.95m

Brexit uncertainty hangs over London’s luxury property market like a fog. Since the referendum in June 2016, house prices in prime central London have dropped 14 per cent, according Savills. Meanwhile, sales are down 19 per cent, according to LonRes.

However, despite the endless political wrangling, some buyers believe they see the opportunity for a Brexit bargain — especially if they are buying in dollars.

One US-based buyer, who asked to remain anonymous, has just bought a flat in Mayfair for £6m after negotiating a discount of more than 10 per cent. He says the weak pound, attractive borrowing rates and overblown stories about professionals leaving London in their droves all contributed to his decision to buy now.

“London is the default investment locale, not only for the US but for the world,” he says. “The idea that people will pick Brussels, Frankfurt or Paris over London was misplaced.”

The fall in the value of sterling since the referendum has made expensive property in London more attractive to overseas buyers. On the currency play alone, if the US-based buyer had paid for his £6m flat in dollars in October 2015, it would have cost him about $9.18m; this month, the dollar amount would be $7.8m. The buyer expects the strong value of the dollar to fall eventually, making his investment worthwhile.

“In the short term the UK has been disproportionately hurt by Brexit, but in the long term it won’t be at all,” he says. He intends to rent out his apartment and is expecting a 3 per cent yield.

This buyer’s approach is typical of many international purchasers who leverage the currency advantage. New data from LonRes show that transactions on properties in prime central London rose 14 per cent in the third quarter of 2019 compared with the same period last year.

“There is much more activity than we were expecting in the run-up to the Brexit deadline [of October 31],” says Rory Penn of Knight Frank. He sees buyers taking a long-term view, especially when relocating a family to London for the next five to 10 years. “You can get a much better house than you could a couple of years ago,” he says.

“I don’t think there is any rush to sell but a lot of our buyers have been buying this year because they believe it’s the right time,” says Camilla Dell of buying agency Black Brick. “Brexit is a blip — it will be over soon,” says Ed Lewis, head of residential development sales at Savills. “The further away you are from London, the less Brexit is relevant. If you’re sitting in Hong Kong, Beijing or Shanghai, you look at London in terms of currency value and see it as an exciting opportunity.”

Buyers do not even need to be far away. A 48-year-old Belgian national who also asked to remain anonymous recently bought a smart family house in north-west London after renting in the city for several years.

“If I could, I would have bought two or three years earlier,” she says. “But I am not unhappy because when the market is nervous, it is not a bad time to buy.”

She paid £2.5m for her six-bedroom semi-detached house near Willesden Green. She bought the home through Sotheby’s and managed to negotiate 11 per cent off the asking price.

Similar discounts — and even larger ones — abound. Several homes on the market with asking prices of more than £5m have had their prices slashed by more than 30 per cent. A six-bedroom house in Chelsea, currently marketed for £5.95m, was listed in 2013 at £9m, according to Zoopla. In Hampstead, a six-bedroom home currently marketed for £5.25m was listed on Zoopla in November 2016 for £6.95m.

Estate agency Arlington Residential is selling a seven-bedroom house in Highgate for £8.65m that was originally priced at £11.95m. Best Gapp is marketing a five-bedroom house on Halkin Place in Belgravia for £8.95m, a reduction of £1m on its original asking price; and a six-bedroom terraced house in Westminster’s Smith Square is on offer for £6.95m, down from £7.85m via Maskells. “I don’t think the market will do anything for a year or two,” says the Belgian buyer. “The next 10 years will turn out to be a good time to buy.”

“It’s not that Labour itself is bad news for the housing market, which usually does well under Labour government,” says Henry Pryor, an independent buying agent, “but Corbyn and McDonnell’s version of socialism frightens clients — they have openly talked about sequestrating long-term empty properties and discussed extending Right to Buy to private tenants.”

“Anyone in the middle and upper class would be badly affected,” says Trevor Abrahmsohn of Glentree Estates, predicting a flight of capital from the UK as “wealth creators” find other places to live. “Corbynistas are trying to make the poor rich by making the rich poor,” he says.

Calls grow louder for full-scale overhaul of UK property tax

Stamp duty has been fiscal weapon but whole regime deemed too complicated

By James Pickford

Stamp duty has become the UK government’s “fiscal weapon of choice” in the housing market but calls for a full-scale overhaul of the property tax are growing as new surcharges and reliefs spark criticism of an increasingly unwieldy regime.

The charge, paid by buyers on property purchases above £125,000, has been subject to a string of tweaks and accretions in the past six years, as ministers have used it to favour some purchasers, such as first-time buyers, with reliefs and discourage others, such as buy-to-let landlords, with extra rates.

The next group set to find itself paying more is non-UK-resident buyers, after Whitehall officials told the FT this week that a stamp duty surcharge of up to 3 percentage points on overseas purchasers of UK property was expected to be included in the Budget on March 11. Receipts from the additional tax are to be used to tackle rough sleeping.

The measure comes after a 3 per cent surcharge was introduced in 2016 for those buying second and buy-to-let homes, in a move aimed at dousing activity among landlord investors. If the new surcharge on non-residents is confirmed at levels close to 3 per cent, overseas buyers who already own a home could end up paying up to 18 per cent in stamp duty on the portion of the purchase price over £1.5m.

Camilla Dell, managing partner of buying agent Black Brick, said the 2016 surcharge, particularly for those whose house sale falls through leaving them with two properties, had created new administrative difficulties. “The whole property tax regime has just become too complicated. It’s a headache,” she said.

The latest fiscal salvo targeting overseas buyers sent a curious message under a post-Brexit government with bold international ambitions, she added. “I don’t believe foreign buyers are the root cause of problems in the housing market. I think they’re an easy target for the government because they don’t vote.”

In the 2017 Budget, then chancellor Philip Hammond unveiled stamp duty relief for first-time buyers of homes worth less than £500,000. This followed another major change in 2014 — one broadly welcomed by the market — when his predecessor George Osborne did away with the old “slab” system of stamp duty, under which a single rate was charged on the entire value of the property.

It was replaced with a “slice” arrangement where higher rates only apply to the portion of the value above certain thresholds.

Even so, the “bolt-on” approach to stamp duty changes has drawn many detractors, far beyond the estate agents who habitually complain of its chilling effects on sentiment. Transaction taxes are anathema to economists and housing market experts who say they benefit those who stay put and penalise those who move. Neal Hudson, director at housing market research firm Residential Analysts, said: “It’s a stupid tax and not how you would go about taxing property if you were to start from scratch.”

The Institute for Fiscal Studies, a think-tank, has described it as a “dysfunctional” tax and has urged Rishi Sunak, chancellor, to reform council tax to increase charges on more valuable properties. The valuations on which council tax is based have not been updated since 1991.

The Royal Institution of Chartered Surveyors argues that the changes since 2014 have helped first time buyers but deterred existing homeowners from considering a move. “We therefore believe government should establish a review to address all fiscal measures which impact housing supply, the taxation of homeowners and landlords, and encourages innovation and improved infrastructure,” it said.

Even Sajid Javid, who resigned last month as chancellor, has spoken out against the current state of stamp duty, telling the Times last weekend that it was “too high”, “very distortive” and “needs significant change”.

But the political appeal of a root-and-branch overhaul is unclear, particularly when the government is absorbed in managing the coronavirus crisis. Stamp duty has become an increasingly important source of tax revenue in recent years, generating £8.37bn in tax receipts in 2018-19, according to provisional government figures. Much of this is accounted for by sales of homes in London and the south-east. Transactions in these two regions brought in £5.07bn, 61 per cent of the total for England and Northern Ireland.

In light of prime minister Boris Johnson’s repeated commitment to “level up” economic inequalities between regions, the political gains from forcing through radical changes to a tax that is largely paid by wealthier groups in the south of England are questionable.

Politicians last year flirted with the idea of switching stamp duty from a tax paid by the buyer to the seller, but economists argue that such a measure would simply raise prices. Longstanding alternatives in the shape of a land tax or reform of council tax, though backed by economists, remain unpalatable for Conservative MPs mindful of their constituents’ economic interests.

When the Daily Telegraph reported last month that stamp duty cuts were under discussion in government circles, it was notable that any reductions were said to be tied to the introduction of a “mansion tax”, said Lucian Cook, residential research director at estate agent Savills.

“That gives you a fairly strong clue as to the extent to which the government are going to be protective of their tax revenues. They were looking for a means by which they could make any changes revenue neutral.”

Mr Cook concluded that the prospects of a thoroughgoing revamp of Britain’s housing transaction tax are remote. “Stamp duty has become the government’s fiscal weapon of choice as far as housing is concerned. It is probably due an overhaul. The issue is whether anyone’s got the stomach to do it when it continues to be a significant cash generator for the Treasury.”