Billionaires eye London rentals as rates, taxes dent buying mood
A GROWING number of London’s richest homebuyers are choosing to rent rather than buy, as high interest rates and a tough tax environment curb investment.
Billionaires and multi-millionaires purchased £340 million (S$571.7 million) worth of London homes valued above £15 million between January and June, equating to an average of two deals per month, according to a report by luxury broker Beauchamp Estates based on data from LonRes and Wealth-X.
That’s down from over £400 million worth of sales in the first half of 2022, and £514 million in a six-month post-lockdown period during 2021.
Meanwhile, an average of at least 10 super prime homes were rented for values over £5,000 per week each month in the first half of this year, almost double the amount recorded in 2022.
“London is competing with other rival wealth hubs such as Dubai, the French Riviera and Manhattan to attract multi-millionaires and billionaires,” said Jeremy Gee, managing director at Beauchamp Estates.
“Domestic issues including interest rates, taxation and state regulation play a significant role in the decision making process.”
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Rising borrowing costs, economic uncertainty and the worst cost-of-living crisis in a generation have driven a slowdown in the UK property sector this year.
While London’s luxury housing market is more insulated from such headwinds, where buyers are typically less debt-dependent, negative sector sentiment and political uncertainty as the country gears up for a general election as soon as next year are impacting demand.
Beauchamp Estates warned that stamp duty, higher scrutiny into finances and the potential for a Labour Party government at the next election, which needs to take place no later than January 2025, are concerns for billionaires looking to buy property in the UK.
The yield for apartments in Dubai – where the currency is pegged to the US dollar and rental income is not taxed – stood at 7.34 per cent this summer, according to broker CBRE Group.
By comparison, the average yield in London was 4.18 per cent in the first quarter of this year, and in prime central London it was even lower at 3.6 per cent.
Still, the smaller pool of billionaire buyers purchased larger and more expensive houses in London between January and May, with the average amount spent on a property rising to £30 million from £21 million in the same period last year.
That’s on the back of a growing share of cash buyers, which rose to 59 per cent of all prime central London purchases between January and July, compared with 47 per cent for the same period in 2022, the report said.
Today’s billionaires – many of whom work in finance and tech – typically invest about a third of their total wealth on residential real estate, according to the report.
What’s more, the number of super rich-individuals is projected to grow 28 per cent by 2026, said the report.
“Ultra-prime markets have shown remarkable resilience,” said Gary Hersham, founding director of Beauchamp Estates. “The high share of cash purchases has helped to cushion the impact of higher interest rates, with American, Chinese and Hong Kong buyers being extremely active in the London market.” BLOOMBERG
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