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Brexit bargains: London’s luxury homes take big price cuts

Wealthy buyers are benefiting from political uncertainty — especially if they are paying in dollars

Five-bedroom house in Belgravia has cut its original asking price by £1m to £8.95m

Brexit uncertainty hangs over London’s luxury property market like a fog. Since the referendum in June 2016, house prices in prime central London have dropped 14 per cent, according Savills. Meanwhile, sales are down 19 per cent, according to LonRes.

However, despite the endless political wrangling, some buyers believe they see the opportunity for a Brexit bargain — especially if they are buying in dollars.

One US-based buyer, who asked to remain anonymous, has just bought a flat in Mayfair for £6m after negotiating a discount of more than 10 per cent. He says the weak pound, attractive borrowing rates and overblown stories about professionals leaving London in their droves all contributed to his decision to buy now.

“London is the default investment locale, not only for the US but for the world,” he says. “The idea that people will pick Brussels, Frankfurt or Paris over London was misplaced.”

The fall in the value of sterling since the referendum has made expensive property in London more attractive to overseas buyers. On the currency play alone, if the US-based buyer had paid for his £6m flat in dollars in October 2015, it would have cost him about $9.18m; this month, the dollar amount would be $7.8m. The buyer expects the strong value of the dollar to fall eventually, making his investment worthwhile.

“In the short term the UK has been disproportionately hurt by Brexit, but in the long term it won’t be at all,” he says. He intends to rent out his apartment and is expecting a 3 per cent yield.

This buyer’s approach is typical of many international purchasers who leverage the currency advantage. New data from LonRes show that transactions on properties in prime central London rose 14 per cent in the third quarter of 2019 compared with the same period last year. 

“There is much more activity than we were expecting in the run-up to the Brexit deadline [of October 31],” says Rory Penn of Knight Frank. He sees buyers taking a long-term view, especially when relocating a family to London for the next five to 10 years. “You can get a much better house than you could a couple of years ago,” he says.

“I don’t think there is any rush to sell but a lot of our buyers have been buying this year because they believe it’s the right time,” says Camilla Dell of buying agency Black Brick. “Brexit is a blip — it will be over soon,” says Ed Lewis, head of residential development sales at Savills. “The further away you are from London, the less Brexit is relevant. If you’re sitting in Hong Kong, Beijing or Shanghai, you look at London in terms of currency value and see it as an exciting opportunity.”

Buyers do not even need to be far away. A 48-year-old Belgian national who also asked to remain anonymous recently bought a smart family house in north-west London after renting in the city for several years.

“If I could, I would have bought two or three years earlier,” she says. “But I am not unhappy because when the market is nervous, it is not a bad time to buy.” 

She paid £2.5m for her six-bedroom semi-detached house near Willesden Green. She bought the home through Sotheby’s and managed to negotiate 11 per cent off the asking price.

Similar discounts — and even larger ones — abound. Several homes on the market with asking prices of more than £5m have had their prices slashed by more than 30 per cent. A six-bedroom house in Chelsea, currently marketed for £5.95m, was listed in 2013 at £9m, according to Zoopla. In Hampstead, a six-bedroom home currently marketed for £5.25m was listed on Zoopla in November 2016 for £6.95m.

Estate agency Arlington Residential is selling a seven-bedroom house in Highgate for £8.65m that was originally priced at £11.95m. Best Gapp is marketing a five-bedroom house on Halkin Place in Belgravia for £8.95m, a reduction of £1m on its original asking price; and a six-bedroom terraced house in Westminster’s Smith Square is on offer for £6.95m, down from £7.85m via Maskells. “I don’t think the market will do anything for a year or two,” says the Belgian buyer. “The next 10 years will turn out to be a good time to buy.”

Seven-bedroom house in Highgate was originally priced at £11.95m; it is now for sale at £8.65m

If she were taking a short-term position, she says a bigger concern is a change in the UK government.

“It’s not that Labour itself is bad news for the housing market, which usually does well under Labour government,” says Henry Pryor, an independent buying agent, “but Corbyn and McDonnell’s version of socialism frightens clients — they have openly talked about sequestrating long-term empty properties and discussed extending Right to Buy to private tenants.”

A six-bedroom house in Smith Square has had its price cut from £7.85m to £6.95m © AlexWinship Photography

“Anyone in the middle and upper class would be badly affected,” says Trevor Abrahmsohn of Glentree Estates, predicting a flight of capital from the UK as “wealth creators” find other places to live. “Corbynistas are trying to make the poor rich by making the rich poor,” he says.

Calls grow louder for full-scale overhaul of UK property tax

Stamp duty has been fiscal weapon but whole regime deemed too complicated

By James Pickford

Stamp duty has become the UK government’s “fiscal weapon of choice” in the housing market but calls for a full-scale overhaul of the property tax are growing as new surcharges and reliefs spark criticism of an increasingly unwieldy regime.

The charge, paid by buyers on property purchases above £125,000, has been subject to a string of tweaks and accretions in the past six years, as ministers have used it to favour some purchasers, such as first-time buyers, with reliefs and discourage others, such as buy-to-let landlords, with extra rates.

The next group set to find itself paying more is non-UK-resident buyers, after Whitehall officials told the FT this week that a stamp duty surcharge of up to 3 percentage points on overseas purchasers of UK property was expected to be included in the Budget on March 11. Receipts from the additional tax are to be used to tackle rough sleeping.

The measure comes after a 3 per cent surcharge was introduced in 2016 for those buying second and buy-to-let homes, in a move aimed at dousing activity among landlord investors. If the new surcharge on non-residents is confirmed at levels close to 3 per cent, overseas buyers who already own a home could end up paying up to 18 per cent in stamp duty on the portion of the purchase price over £1.5m.

Camilla Dell, managing partner of buying agent Black Brick, said the 2016 surcharge, particularly for those whose house sale falls through leaving them with two properties, had created new administrative difficulties. “The whole property tax regime has just become too complicated. It’s a headache,” she said.

The latest fiscal salvo targeting overseas buyers sent a curious message under a post-Brexit government with bold international ambitions, she added. “I don’t believe foreign buyers are the root cause of problems in the housing market. I think they’re an easy target for the government because they don’t vote.”

In the 2017 Budget, then chancellor Philip Hammond unveiled stamp duty relief for first-time buyers of homes worth less than £500,000. This followed another major change in 2014 — one broadly welcomed by the market — when his predecessor George Osborne did away with the old “slab” system of stamp duty, under which a single rate was charged on the entire value of the property.

It was replaced with a “slice” arrangement where higher rates only apply to the portion of the value above certain thresholds.

Even so, the “bolt-on” approach to stamp duty changes has drawn many detractors, far beyond the estate agents who habitually complain of its chilling effects on sentiment. Transaction taxes are anathema to economists and housing market experts who say they benefit those who stay put and penalise those who move. Neal Hudson, director at housing market research firm Residential Analysts, said: “It’s a stupid tax and not how you would go about taxing property if you were to start from scratch.”

The Institute for Fiscal Studies, a think-tank, has described it as a “dysfunctional” tax and has urged Rishi Sunak, chancellor, to reform council tax to increase charges on more valuable properties. The valuations on which council tax is based have not been updated since 1991.

The Royal Institution of Chartered Surveyors argues that the changes since 2014 have helped first time buyers but deterred existing homeowners from considering a move. “We therefore believe government should establish a review to address all fiscal measures which impact housing supply, the taxation of homeowners and landlords, and encourages innovation and improved infrastructure,” it said.

Even Sajid Javid, who resigned last month as chancellor, has spoken out against the current state of stamp duty, telling the Times last weekend that it was “too high”, “very distortive” and “needs significant change”.

But the political appeal of a root-and-branch overhaul is unclear, particularly when the government is absorbed in managing the coronavirus crisis. Stamp duty has become an increasingly important source of tax revenue in recent years, generating £8.37bn in tax receipts in 2018-19, according to provisional government figures. Much of this is accounted for by sales of homes in London and the south-east. Transactions in these two regions brought in £5.07bn, 61 per cent of the total for England and Northern Ireland.

In light of prime minister Boris Johnson’s repeated commitment to “level up” economic inequalities between regions, the political gains from forcing through radical changes to a tax that is largely paid by wealthier groups in the south of England are questionable.

Politicians last year flirted with the idea of switching stamp duty from a tax paid by the buyer to the seller, but economists argue that such a measure would simply raise prices. Longstanding alternatives in the shape of a land tax or reform of council tax, though backed by economists, remain unpalatable for Conservative MPs mindful of their constituents’ economic interests.

When the Daily Telegraph reported last month that stamp duty cuts were under discussion in government circles, it was notable that any reductions were said to be tied to the introduction of a “mansion tax”, said Lucian Cook, residential research director at estate agent Savills.

“That gives you a fairly strong clue as to the extent to which the government are going to be protective of their tax revenues. They were looking for a means by which they could make any changes revenue neutral.”

Mr Cook concluded that the prospects of a thoroughgoing revamp of Britain’s housing transaction tax are remote. “Stamp duty has become the government’s fiscal weapon of choice as far as housing is concerned. It is probably due an overhaul. The issue is whether anyone’s got the stomach to do it when it continues to be a significant cash generator for the Treasury.”

Calls grow louder for full-scale overhaul of UK property tax

Stamp duty has been fiscal weapon but whole regime deemed too complicated

By James Pickford

Stamp duty has become the UK government’s “fiscal weapon of choice” in the housing market but calls for a full-scale overhaul of the property tax are growing as new surcharges and reliefs spark criticism of an increasingly unwieldy regime.

The charge, paid by buyers on property purchases above £125,000, has been subject to a string of tweaks and accretions in the past six years, as ministers have used it to favour some purchasers, such as first-time buyers, with reliefs and discourage others, such as buy-to-let landlords, with extra rates.

The next group set to find itself paying more is non-UK-resident buyers, after Whitehall officials told the FT this week that a stamp duty surcharge of up to 3 percentage points on overseas purchasers of UK property was expected to be included in the Budget on March 11. Receipts from the additional tax are to be used to tackle rough sleeping.

The measure comes after a 3 per cent surcharge was introduced in 2016 for those buying second and buy-to-let homes, in a move aimed at dousing activity among landlord investors. If the new surcharge on non-residents is confirmed at levels close to 3 per cent, overseas buyers who already own a home could end up paying up to 18 per cent in stamp duty on the portion of the purchase price over £1.5m.

Camilla Dell, managing partner of buying agent Black Brick, said the 2016 surcharge, particularly for those whose house sale falls through leaving them with two properties, had created new administrative difficulties. “The whole property tax regime has just become too complicated. It’s a headache,” she said.

The latest fiscal salvo targeting overseas buyers sent a curious message under a post-Brexit government with bold international ambitions, she added. “I don’t believe foreign buyers are the root cause of problems in the housing market. I think they’re an easy target for the government because they don’t vote.”

In the 2017 Budget, then chancellor Philip Hammond unveiled stamp duty relief for first-time buyers of homes worth less than £500,000. This followed another major change in 2014 — one broadly welcomed by the market — when his predecessor George Osborne did away with the old “slab” system of stamp duty, under which a single rate was charged on the entire value of the property.

It was replaced with a “slice” arrangement where higher rates only apply to the portion of the value above certain thresholds.

Even so, the “bolt-on” approach to stamp duty changes has drawn many detractors, far beyond the estate agents who habitually complain of its chilling effects on sentiment. Transaction taxes are anathema to economists and housing market experts who say they benefit those who stay put and penalise those who move. Neal Hudson, director at housing market research firm Residential Analysts, said: “It’s a stupid tax and not how you would go about taxing property if you were to start from scratch.”

The Institute for Fiscal Studies, a think-tank, has described it as a “dysfunctional” tax and has urged Rishi Sunak, chancellor, to reform council tax to increase charges on more valuable properties. The valuations on which council tax is based have not been updated since 1991.

The Royal Institution of Chartered Surveyors argues that the changes since 2014 have helped first time buyers but deterred existing homeowners from considering a move. “We therefore believe government should establish a review to address all fiscal measures which impact housing supply, the taxation of homeowners and landlords, and encourages innovation and improved infrastructure,” it said.

Even Sajid Javid, who resigned last month as chancellor, has spoken out against the current state of stamp duty, telling the Times last weekend that it was “too high”, “very distortive” and “needs significant change”.

But the political appeal of a root-and-branch overhaul is unclear, particularly when the government is absorbed in managing the coronavirus crisis. Stamp duty has become an increasingly important source of tax revenue in recent years, generating £8.37bn in tax receipts in 2018-19, according to provisional government figures. Much of this is accounted for by sales of homes in London and the south-east. Transactions in these two regions brought in £5.07bn, 61 per cent of the total for England and Northern Ireland.

In light of prime minister Boris Johnson’s repeated commitment to “level up” economic inequalities between regions, the political gains from forcing through radical changes to a tax that is largely paid by wealthier groups in the south of England are questionable.

Politicians last year flirted with the idea of switching stamp duty from a tax paid by the buyer to the seller, but economists argue that such a measure would simply raise prices. Longstanding alternatives in the shape of a land tax or reform of council tax, though backed by economists, remain unpalatable for Conservative MPs mindful of their constituents’ economic interests.

When the Daily Telegraph reported last month that stamp duty cuts were under discussion in government circles, it was notable that any reductions were said to be tied to the introduction of a “mansion tax”, said Lucian Cook, residential research director at estate agent Savills.

“That gives you a fairly strong clue as to the extent to which the government are going to be protective of their tax revenues. They were looking for a means by which they could make any changes revenue neutral.”

Mr Cook concluded that the prospects of a thoroughgoing revamp of Britain’s housing transaction tax are remote. “Stamp duty has become the government’s fiscal weapon of choice as far as housing is concerned. It is probably due an overhaul. The issue is whether anyone’s got the stomach to do it when it continues to be a significant cash generator for the Treasury.”

Calls grow louder for full-scale overhaul of UK property tax

Stamp duty has been fiscal weapon but whole regime deemed too complicated

By James Pickford

Stamp duty has become the UK government’s “fiscal weapon of choice” in the housing market but calls for a full-scale overhaul of the property tax are growing as new surcharges and reliefs spark criticism of an increasingly unwieldy regime.

The charge, paid by buyers on property purchases above £125,000, has been subject to a string of tweaks and accretions in the past six years, as ministers have used it to favour some purchasers, such as first-time buyers, with reliefs and discourage others, such as buy-to-let landlords, with extra rates.

The next group set to find itself paying more is non-UK-resident buyers, after Whitehall officials told the FT this week that a stamp duty surcharge of up to 3 percentage points on overseas purchasers of UK property was expected to be included in the Budget on March 11. Receipts from the additional tax are to be used to tackle rough sleeping.

The measure comes after a 3 per cent surcharge was introduced in 2016 for those buying second and buy-to-let homes, in a move aimed at dousing activity among landlord investors. If the new surcharge on non-residents is confirmed at levels close to 3 per cent, overseas buyers who already own a home could end up paying up to 18 per cent in stamp duty on the portion of the purchase price over £1.5m.

Camilla Dell, managing partner of buying agent Black Brick, said the 2016 surcharge, particularly for those whose house sale falls through leaving them with two properties, had created new administrative difficulties. “The whole property tax regime has just become too complicated. It’s a headache,” she said.

The latest fiscal salvo targeting overseas buyers sent a curious message under a post-Brexit government with bold international ambitions, she added. “I don’t believe foreign buyers are the root cause of problems in the housing market. I think they’re an easy target for the government because they don’t vote.”

In the 2017 Budget, then chancellor Philip Hammond unveiled stamp duty relief for first-time buyers of homes worth less than £500,000. This followed another major change in 2014 — one broadly welcomed by the market — when his predecessor George Osborne did away with the old “slab” system of stamp duty, under which a single rate was charged on the entire value of the property.

It was replaced with a “slice” arrangement where higher rates only apply to the portion of the value above certain thresholds.

Even so, the “bolt-on” approach to stamp duty changes has drawn many detractors, far beyond the estate agents who habitually complain of its chilling effects on sentiment. Transaction taxes are anathema to economists and housing market experts who say they benefit those who stay put and penalise those who move. Neal Hudson, director at housing market research firm Residential Analysts, said: “It’s a stupid tax and not how you would go about taxing property if you were to start from scratch.”

The Institute for Fiscal Studies, a think-tank, has described it as a “dysfunctional” tax and has urged Rishi Sunak, chancellor, to reform council tax to increase charges on more valuable properties. The valuations on which council tax is based have not been updated since 1991.

The Royal Institution of Chartered Surveyors argues that the changes since 2014 have helped first time buyers but deterred existing homeowners from considering a move. “We therefore believe government should establish a review to address all fiscal measures which impact housing supply, the taxation of homeowners and landlords, and encourages innovation and improved infrastructure,” it said.

Even Sajid Javid, who resigned last month as chancellor, has spoken out against the current state of stamp duty, telling the Times last weekend that it was “too high”, “very distortive” and “needs significant change”.

But the political appeal of a root-and-branch overhaul is unclear, particularly when the government is absorbed in managing the coronavirus crisis. Stamp duty has become an increasingly important source of tax revenue in recent years, generating £8.37bn in tax receipts in 2018-19, according to provisional government figures. Much of this is accounted for by sales of homes in London and the south-east. Transactions in these two regions brought in £5.07bn, 61 per cent of the total for England and Northern Ireland.

In light of prime minister Boris Johnson’s repeated commitment to “level up” economic inequalities between regions, the political gains from forcing through radical changes to a tax that is largely paid by wealthier groups in the south of England are questionable.

Politicians last year flirted with the idea of switching stamp duty from a tax paid by the buyer to the seller, but economists argue that such a measure would simply raise prices. Longstanding alternatives in the shape of a land tax or reform of council tax, though backed by economists, remain unpalatable for Conservative MPs mindful of their constituents’ economic interests.

When the Daily Telegraph reported last month that stamp duty cuts were under discussion in government circles, it was notable that any reductions were said to be tied to the introduction of a “mansion tax”, said Lucian Cook, residential research director at estate agent Savills.

“That gives you a fairly strong clue as to the extent to which the government are going to be protective of their tax revenues. They were looking for a means by which they could make any changes revenue neutral.”

Mr Cook concluded that the prospects of a thoroughgoing revamp of Britain’s housing transaction tax are remote. “Stamp duty has become the government’s fiscal weapon of choice as far as housing is concerned. It is probably due an overhaul. The issue is whether anyone’s got the stomach to do it when it continues to be a significant cash generator for the Treasury.”

How to avoid getting into negative equity if house prices fall: the latest property advice

House prices are likely to fall, which means buyers with high LTV mortgages could find themselves with assets worth less than they borrowed

By Melissa Lawford

Analysts disagree on how much UK house prices will fall due to the coronavirus outbreak and subsequent market freeze, but the consensus is that they will take a hit.

Many buyers are worried about getting into negative equity as soon as they have purchased their homes. This means that you own a property that is worth less than what you borrowed to pay for it.

Buyers who have purchased with high loan-to-value mortgages are most at risk. If you have purchased just 5 per cent of your property with cash, for example, you will quickly be in negative equity if house prices fall by 13 per cent, as forecast by the Centre for Economics and Business Research (CEBR).

But that would not mean that you have to immediately sell your house at a loss. Here, we look at your options, and what buyers can do to protect themselves.

What happens if you get into negative equity?

“The biggest misconception about negative equity is that people think they’re suddenly going to be repossessed,” says Nick Morrey, of John Charcol, an independent mortgage broker. “That couldn’t be further from the truth.”

If you are able to wait out the market until prices climb, you should be fine. “Over every five year period, prices have ended up higher, even if there is a crash in the middle,” says Morrey. 

Most analysts are predicting a “V-shape” economic recovery after lockdown is lifted, and both Capital Economics and Knight Frank expect house prices to return to growth in 2021. “If you do get into negative equity, hold on,” says Tim Hyatt, of Knight Frank.

Most lenders have removed high loan-to-value mortgages for new purchases, says Morrey, but it is still possible to find options for transfers, as these don’t require the lender to send a valuer to the property. If your mortgage deal is coming to an end, talk to your lender about what options you have for switching.

If you’re not able to transfer, you will be moved to a standard variable rate mortgage when your current deal ends. While the costs could be higher than what you were paying before, the difference will be mitigated by the fact that the Bank of England base rate is currently at a historic low of 0.1 per cent.

What if you have to move house?

If you’re in negative equity and you can’t sit tight, your situation is more problematic. You will need permission from your lender to sell if the sale price is likely to be less than the remaining value of the mortgage. And you will be personally responsible for making up the difference in value.

A better option is to contact your lender and ask for consent to let out the property, says Morrey. In other words, you can become an accidental landlord. 

Be wary that rental values are likely to take a hit, particularly with the expected influx of stock from the short-term lettings market with the collapse of the travel industry. But hopefully, the rental income can cover your mortgage payments and free up your disposable income so that you can rent elsewhere while you wait for property prices to recover.

Is now a good time to negotiate a deal?

The Government has issued strong guidance against all but essential house moves during lockdown. While sales can still technically proceed, the market is a minefield. Many chains are falling through and some buyers can’t meet their completion dates.

When lockdown lifts, however, some buyers might consider the market an opportunity. If house prices are falling, “you’re likely to be able to make a cheeky offer,” says Morrey.

There just might not be much stock to take a punt at. After a crisis, “we will always see a bit of distressed selling,” says Camilla Dell, founder of the London buying agency Black Brick. “There will be some undoubtedly, but I think it will be few and far between.” The Government’s measures to protect earnings, mortgage holidays, and low interest rates will mean fewer sellers will be forced to take big price cuts.

If you are trying to negotiate, “the key to success is understanding your seller”, says Dell. If you know why, or how urgently they need to sell, you have more bargaining power.

You will also have an advantage if you “can demonstrate that you can move quicker, and anyone sitting on cash is in a great position”.

For those that aren’t may find that they simply can’t buy. Lenders have withdrawn high LTV mortgages from the market en masse. The available mortgage offering has shrunk by nearly a third and you will likely need a deposit of at least 20 per cent to secure lending. 

Which parts of the country will be safest to buy in?

In the immediate term, the impact of coronavirus and the lockdown will be “very much uniform across the country,” says Lawrence Bowles of Savills Research.

When the restrictions lift, however, “we would expect equity driven markets to recover first,” he says. In prime central London, for example, people are more likely to buy with cash rather than with a mortgage, so purchasers will be able to move more quickly.

Recovery will also be dependent on the local employment markets. According to analysis by the CEBR, 48 per cent of the UK population works across the sectors most affected by the coronavirus lockdown: manufacturing, construction, retail, hospitality and other service sectors.

But their concentrations are highest in particular regions. In Yorkshire & the Humber and Northern Ireland, 60 and 59 per cent of workers are in these industries respectively. Disruption to the job markets here is likely to have a bigger impact on the local housing markets, according to CEBR. 

What should you ask to see on a virtual viewing of a property?

Ask the right questions on a video tour and you wont have to visit as many houses

Happy stamp duty holiday! Now that you have a reason to move, you have probably noticed that practically every property you encounter online comes with the offer of a virtual viewing.

Most will be a video call, on apps such as Whatsapp or Zoom, often with an estate agent on the line. These have become popular with buyers who are shielding and others who are simply unwilling to PPE-up for 12 viewings at the weekend. For many it makes more sense to whittle choices down over the phone and save in-person visits for favourites.

Other buyers complain that they don’t feel in control on video calls. The view is dependent on the camera skills of whoever is holding the phone, or the agent just won’t stop talking.

“Buyers have bespoke needs and should be confident enough to ask the questions that will let them see whether the property meets their requirements,” says Phillippa Dalby-Welsh, co-head of prime central London sales at Savills.

Often this means asking about “hidden” features such as underfloor heating, air con, utility rooms, all-important storage (if they have a loft or a cellar, ask to see it) and the boiler. And while you’re there, can you turn the shower on so I can see what the water pressure is like, please?

It may feel distinctly un-British making such demands of others in their home, but if you’re not there then how else will you find out? Outside space is vital too. Don’t just ask to see it. Dalby-Welsh says that you should ask where the sun falls in the morning and the afternoon, where guests are likely to park and, in the countryside, whether there are footpaths nearby as well as where the property boundaries end.

Jonathan Penn, director of the Ipswich branch of Jackson-Stops, advocates asking about schools, neighbours and shopping, and recommends asking to see views from the main windows.

“Don’t be afraid to ask the agent to stop talking and open the windows so you can try and check for street/traffic noise,” says Camilla Dell, from Black Brick, a buying agency. “If it’s a flat, make sure you get to see the common parts, the lift — all vital and will tell you a lot about the quality of the building and how well it’s managed.”

For the seller it’s a chance to listen to what buyers want and, according to Dalby-Walsh, also a chance for “vendors to sell the lifestyle the buyer is looking for, not just the bricks and mortar.”

360 video tour by Pixangle. House in Charlton, SE7, available to rent, openrent.co.uk.