21 March 2012, Washington Post
Luxury-home prices in central London rose the most in 10months as overseas buyers seeking the safety o f one of the world’s most resilient property markets propelled demand, Knight Frank LLP said in a report today. Values of houses and apartments costing an average of 3.7 million pounds ($5.9 million) gained 1.1 percent in March from a month earlier, the London-based broker said. Prices have been rising for three years and are 10.1 percent above the previous peak in March 2008, before the global financial crisis, said Liam Bailey, Knight Frank’s head of residential research.
“Pressure on price growth and new demand is coming from overseas,” Bailey said by telephone. “People are in danger of underestimating the amount of foreign interest in London as a property market. That’s what keeps things moving.”
Investors from overseas are buying central London homes to preserve wealth amid political and economic tensions in their home markets. Prices for the best London homes have continued to rise despite the U.K. coalition government’s plan to curb tax avoidance on luxury-home sales and calls for a mansion tax.
London luxury-home values rose 11.3 percent in the year through March 20, the smallest 12-month gain since August, according to Knight Frank. The affluent Kensington and Chelsea districts helped to push the asking price of a London home to a record this month as average values broke through the 2 million- pound level for the first time, Rightmove Plc said this week.
Home prices in Britain overall rose 0.1 percent in February, the U.K. Land Registry said March 19.
Chancellor of the Exchequer George Osborne will attack tax avoidance on property transactions to day in his budget, which he says aims to help low-income workers. Osborne is trying to win the backing of his coalition partners, the Liberal Democrats, who are seeking a tax on expensive homes.
Osborne probably will seek to curb the practice of avoiding stamp-duty payments by using offshore
companies to buy a home, said Yolande Barnes, residential research director at Savills Plc.
Stamp duty is a residential real estate transaction tax of as much as 5 percent of the price of homes worth more than 1 million pounds. Closing some loopholes is unlikely to curb demand, according to Black Brick Property Solutions LLP.
“This practice remains rare and any potential stamp duty saving is normally seen as a bonus, rather than a driver of price,” Camilla Dell, managing partner at Black Brick, said in a separate report.
Equity Rich business secretary Vince Cable, a Liberal Democrat, has said that the threshold for the levy should be for homes valued at no less than 2 million pounds. A tax at that level won’t deter foreign buyers and may target those on low incomes who are equity rich, said David Adams, a managing director for property broker John Taylor. “Accountants will use clever schemes to help the wealthy avoid paying it,” Adams, who is trying to sell a house in Kensington for 18 million pounds, said by phone. “It will fall upon many elderly retired people who happen to live in central London.”
Knight Frank compiles its luxury-homes index from its own appraisal values of a sample of the same
properties in the 13 most expensive neighborhoods o f central London, including Belgravia, Kensington and Knightsbridge.
“The rising level of speculation over a potential mansion tax or new wealth taxes appears to have failed to dampen demand for prime London property,” Bailey said in today’s report.