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London's million-pound homes push more buyers into mortgages
[LONDON] More home buyers are resorting to mortgages to purchase London's most expensive houses and apartments as rising prices drag them into higher tax brackets.
Seventy-four per cent of homes costing £1 million (S$1.75 million) or more in the UK capital were bought with a mortgage in the three months through July, up from 65 per cent a year earlier, according to Hamptons International. The figure was as low as 31 per cent during the depths of the financial crisis in 2009.
"Higher stamp duty above the million-pound mark means that owners have to fork out for more tax, eating into equity they might otherwise have had to buy outright," said Fionnuala Earley, residential research director at Hamptons.
"The rise in house prices" means that "many normal family homes in the capital now attract this value."
Stamp-duty rates climb according to property values, with homeowners paying a levy of £43,750 on a one million-pound house, according to HM Revenue and Customs figures for single property ownership. That jumps to £153,750 for a £2 million purchase.
The proportion of buyers using mortgages to acquire homes costing £1 million or more rose in every UK region. The East of England matched the nine percentage-point jump in London, while Wales registered a one percentage-point rise, the Hamptons data show.
In April, the proportion for London reached 72 per cent, which was the highest single-month figure since the broker began compiling the data in 2007. Sales of homes in London's best districts rose 25.3 per cent in the three months through July from a year earlier, according to data compiled by researcher Lonres.
While there are signs that growth in UK house prices is starting to slow, property values are still up an average 18 per cent across the country over the past decade, with the gain in the capital at 78 per cent, according to Savills Plc and Nationwide Building Society.