In regeneration areas and traditional neighbourhoods, luxury homes remain highly desirable.
On the stroke of midnight on December 3, 2014, 98 per cent of the UK’s future homeowners became better off. New rules for stamp duty land tax (SDLT) meant that anyone buying a home worth less than £937,000 would pay less tax on the purchase.
Conversely, as the clock struck 12, the most sought-after areas of London, with the greatest concentrations of luxury and super-prime (£10m-plus) property, became ever so slightly less attractive. The other 2 per cent of house buyers, paying £1m and over, would pay more stamp duty than previously.
“The new stamp duty rules did put a bit of a brake on the high end of the market,” says Steven Cook, responsible for new business origination within structured property finance at Investec Private Bank. “In particular, properties over £2m became significantly more expensive. It’s no secret that since 2014 there have been price falls in luxury areas of London: Kensington, Chelsea, Mayfair and Belgravia.”
You put together all London has to offer, and you think, “Where are there better opportunities in the world?”
In Belgravia, Stuart Bailey is the head of sales for estate agent Knight Frank. He has seen the stamp duty changes disrupt a market he has worked in for 20 years. “Deals are taking longer to achieve, but where the sellers and agents get the price right, business is being done,” he says. “In the super-prime territory, buyers are looking at 12 per cent SDLT. In a market that’s relatively flat at the moment, that is a lot to stomach, and a lot of buyers will be thinking, where am I going to make that 12 per cent back from?”
“It could be 5-7 years to break even if they can’t negotiate it into the buying price,” Bailey continues. “They may have to keep a property longer than they have been used to owning one before. But London is still London – the reasons it’s still popular are well known. A lot of buying this kind of property is not necessarily growth, but about preserving wealth. In the Knight Frank Wealth Report, our survey of wealth managers and their clients’ concerns, the biggest concern for 2017 was political uncertainty, followed by preserving wealth, and then tax. The preservation of equity is very important.”
Cook, too, feels London’s appeal to potential residents remains strong, especially to those from overseas. “Even with the events in Westminster in March, London remains a safe place to live compared with other world cities,” he says. “The legal system is robust and transparent. Property law in the UK is long established. A foreigner can take on a British landlord in court and beat them; in many European countries, that would be very difficult. It’s a great place to educate your children. There are all the leisure attractions. You put those together, and think, ‘Where are there better opportunities in the world than London?’”
Those opportunities have just been broadened with the announcement of a Santiago Calatrava-designed building with private apartments, to be built as part of the Greenwich Peninsula development on the south bank of the Thames opposite Canary Wharf. Calatrava is the Spanish architect most noted for his public buildings and bridges. He rarely does residential projects, and so his London apartments are already in high demand.
“We’re not even close to releasing those apartments, but we’ve already had calls from people keenly interested in them,” says Richard Margree, Chief Executive of Knight Dragon, the developer of Greenwich Peninsula. “Buying a Calatrava apartment, and in London especially, is a big deal.”
Margree won’t be drawn on the price of those properties, but he expects them to significantly exceed the £2.1m paid off-plan for a penthouse in one of five towers currently under construction elsewhere on Greenwich Peninsula designed by SOM (Skidmore, Owings & Merrill). The US architectural firm also designed the Burj Khalifa in Dubai and One World Trade Centre in New York City.
“When you’re building a brand new place,” Margree says, “you can stand there and see the potential. In a regeneration area, one of those potentials is investment growth. You’re getting in relatively early in a place that gets more attractive to buyers because the lifestyle becomes more compelling, and you get that return on your investment.”
It seems that, whether in traditional neighbourhoods or regeneration areas, London’s luxury properties are still as in demand as ever.