May 25, 2016

The Billionaire Boom: Is London Still the First Choice for the World’s Wealthy?

It was reported last year that London had overtaken New York, Hong Kong, Singapore and Sydney as the must-have property location for the world’s wealthy, with 6,250 annual property sales in the $2–$5 million bracket in 2014; Manhattan saw half that and Hong Kong a third.


These dramatic statistics were released amid concern about what the prime property boom might mean for the rest of the city, but sales of prime property have since plummeted thanks (mostly) to George Osborne’s so-called mansion tax. So has London now lost its status as the world’s pre-eminent luxury property hotspot?

London: money magnet rollercoaster


At first glance, a figure north of six thousand London properties sold in the aforementioned range might not seem huge, but comparing it to sales of similar properties in 2009 – just 2,147 – gives some indication of just how dramatic London’s prime property boom has been.


The 2015 report further revealed the city’s attraction when it came to ultra-prime purchases: 1,638 luxury houses and apartments were sold for over $5 million compared to just 796 in Manhattan, 258 in Sydney and 21 in Los Angeles.[1]


Boom to bust


But then the mansion tax imposed restrictions on second-home buyers and private investors, and the bidding wars came to a grinding halt. From July to September last year, sales of £1–£2 million properties dropped by more than 22.5% compared to the same period in 2014. Property sales above £5 million fell by 29% between January and October 2015.


Commentators also point to an increase in stamp duty to 12%, which is applied to properties valued at more than £1.5 million.


Admittedly, the ups and downs of the posh property market can seem like someone else’s problem, but what does it all mean for the rest of the London?


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How the other half live


In short, it matters depending on where you live. By November 2015 the average property price in Kensington and Chelsea, Westminster, Camden, Hammersmith and Fulham had dropped 8.7% over the year as people shied away from higher stamp duty and investors looked outside of the city limits for a better return.


But such softness in the most expensive areas of London hasn’t had a large bearing on London’s affordability crisis. Outer boroughs are still seeing double-digit house price growth. The average house price in Newham, London’s poorest borough, is £401,945 (up 20.9% year-on-year), and first-time buyers are pushed further out as demand continues to outstrip supply.


Here at Keatons, we have our fingers firmly on the pulse of the London property market. If you’re looking to buy or sell in London, or you’d like to know more about current market conditions, please get in touch with us.


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