“Generation rent” might be priced out of the UK property market, but renting is also becoming more prominent among a very different group : London’s richest.
With an increase in stamp duty on second homes and prices starting to fall in the capital’s wealthiest areas, would-be-buyers of homes worth more than £10m are increasingly are more and more opting to become tenants instead.
Agents named the uncertainty over the UK’s referendum on its EU membership and concerns about the use of offshore companies for property purchases following the Panama Papers leak as possible reasons for the shift.
Since 2011, the number of letting deals on homes worth £10m+ each year has more than doubled, and rose almost 33% in the year to March 2016, according to figures by estate agency Knight Frank.
During the same period of time, sales of home with such a high value dropped to 138, down from a peak of 206 a year earlier.
“No one is predicting that homes at the top end will be worth 10 per cent more in the near future and most people think they will be worth less,” said Henry Pryor, a buying agent. “It is much easier to make a decision to rent and make sure that if you do buy it’s something you really want.”
Tom Bill, head of London residential research at Knight Frank, explained that stamp duty now on a £15m home would come up to a total of £1.7m, equalling three years worth of rent. This rate is even higher if the buyer already owns another home, due to reforms made to stamp duty earlier this month.
The length of the stay of “supreme renters” has also extended. It is now reaching two years, after averaging between 12 and 17 months for the five years before.
Leases setting you back £5,000 a week or more can be found in plenty around areas such as South Kensington, Knightsbridge, Mayfair, Regent’s Park and Holland Park. This can be a lucrative business for landlords achieving up to 4% yields here, compared to 2.9% on average in London.
Mr Pryor said the Panama Papers leak, which revealed the owners of a series of offshore companies used to buy London properties, had highlighted that “no one can [buy] quietly”. He added: “There are some people who will be put off by that, and they should be.”
Charles McDowell, a high-end estate agent, explained that he had received various rental offers on properties that had been marketed for sale.
However, Tom Smith, head of super-prime lettings at Knight Frank, warned potential landlords of such homes to expect demanding tenants. “A common mistake is to think the requirements of a tenant are less stringent than they are if they were buying the house,” he said.
Source: Financial Times