The key changes affecting the property market were as follows:
• Stamp duty increased by 2% for properties over £2million to 7% from midnight
• Stamp duty on property owned by a non-resident entity increased to 15% with immediate effect
• Government to bring in new general rules to clamp down on tax avoidance as part of the 2013 Finance Bill plus a warning that this is likely to include retrospective measures

Prime property

I have to admit, the 2% stamp duty increase took the property market by surprise. It had been leaked to the FT that morning but no-one thought it would take effect immediately, so we were straight on the phone to our buyers for property over the new threshold and plans for Wednesday afternoon were scrapped as we assisted affected Clients to exchange before the midnight deadline, saving all concerned hundreds of thousands of pounds.

In the longer term, Manse & Garret Property Search are not forecasting significant change to prime property sales in prime central London. Clearly the £2 – £2.25m price bracket will feel some aftershock for a few months, but given the lack of supply and increasing demand for stock in the best areas, we don’t think the increase in stamp duty will have a marked effect.

However affected property just outside the centre is likely to take a hit. Popular areas from Richmond, Chiswick and Fulham to the West, Islington, West Hampstead and Muswell Hill to the North and Greenwich and Blackheath to the East are likely to suffer few sales between £2m and £2.25m in the months to come. Motivated vendors are likely to take a hit on price but many will stick to their guns and hold out for the extra hundred thousand and these sales will stick.

Although about 80% of the prime central London market is dominated by overseas investors and many people buy using a corporate structure, in the grand scheme of things, given the capital gains which are routinely made in prime central London, we don’t see the new rules making a difference to price. After all, the best apartments on the best roads from Knightsbridge, Belgravia and Mayfair to Chelsea and Notting Hill are appreciating at circa 20% per year. Most investors will hold prime central London real Estate for 3 years or more so although the 7% stamp duty is an irritation, it won’t make a difference to the logical investor. Also the factors driving the prime central London property market remain, ie political instability in parts of the middle east, the rise of emerging markets who want to keep their offshore earnings offshore but in a stable political and economic situation and global economic uncertainty which favours prime central London real estate as an asset class.

The good news for buyers is that the current low stock levels are likely to be improved for the next year or so, as those looking to sell, rush to do so, mindful of the threat of retrospective legislation, when it comes in in 2013.

Super-prime property

It is the buyers of super-prime property £15m plus who will suffer most from the budget 2012 and it will be interesting to see the effect on this area of the market. There is very little to choose from in this market, few are advertised officially and those which are available are frequently priced using a multiple of their true value. Most of these houses and apartments are used as pied-a-terres and I suspect some will struggle for a few months, while the tax advisors of the super-wealthy find a scheme to mitigate tax and the prospective buyers consider whether they still want an awe-inspiring place in the UK.

The sub-£2 million property market London and Country

There will inevitably be a number of investors with large portfolios of property held by offshore companies who decide to liquidate ahead of the 2013 Finance Bill. As a result we anticipate more stock coming to the market over the next year but whilst this will increase choice for buyers, we don’t think it will have a huge impact in price, although prices should hopefully stabilise this year and not make the significant gains seen during 2011.

Given the issues with very restricted supply and burgeoning demand, which are likely to continue, we definitely don’t see the measures reducing prices.

Technorati Tags: budget, capital appreciation, prime central London property, Stamp Duty, Tax

Tags: budget, capital appreciation, prime central London property, Stamp Duty, Tax

In August last year Manse and Garret blogged about the mansion tax proposals which had been floated at the recent Liberal Democrat conference. The idea went away almost as rapidly as it had appeared with senior Tories, such as Boris Johnson and Eric Pickles, arguing it would punish people for enjoying a buoyant property market, particularly in London. However the issue is back just in time for the Budget with many suggesting that a mansion tax on properties worth over £2 million could be introduced to buy Liberal Democrat support for the abolition of the 50p tax rate. It’s not exactly clear how the scheme would be administered but the system favoured by Vince Cable, Business Secretary, is a 1 or 2% annual rate on the value of the property over £2 million.

The primary argument in favour of the mansion tax is that it is a tax on ‘wealth’ as opposed to a tax on ‘income’. However at Manse and Garret we see on a daily basis that this simply isn’t the case. We deal with properties costing over £2 million and they are a far cry from a mansion. In prime central London £2 million normally only buys you a flat, usually a leasehold one – which means that you don’t really own the ‘mansion’ you have bought. In the London surburbs – Richmond, Putney, Muswell Hill, Highgate – over £2 million will get you a house but at less than £3 million it’s often semi-detached, with very little garden to speak of and it’s on a typical residential street. The simple fact is that if you picked these properties up and placed them in any number of good postcodes around the country – Lewes, Solihull, Alderley Edge– they wouldn’t fetch £1 million, let alone £2 million and above. So what we really have is a tax on London and it’s environs.

The tax will not even affect wealthy Londoners but rather people who are asset rich, many of whom have chosen to buy in and around London because they work in the city. They are being punished because they want to raise their families in a nice environment without a lengthy commute at either end of their busy working day or because they want to enjoy central London entertainment and shopping resources as a reward at the end of their long working day. The notion that the people buying the properties in London worth over £2 million are all fabulously wealthy, non-working and lazy individuals with money from some unknown but ultimately bottomless source is a myth. They are hard working individuals who contribute to the economic worth of Britain every day.

That’s why Manse and Garret do not favour a mansion tax, but if George Osborne decides that he does on Wednesday 23^rd March we will continue to be committed to helping our clients find fabulous properties, which will retain their value and make the mansion tax seem like a small price to pay for owning such a good investment.

Here at Manse and Garret Property Search we source properties in London’s best areas and on London’s best roads. However only occasionally do we come across properties in London’s best buildings – buildings so unique and well known that they often command a higher price tag than other comparable homes in the area. We always have to ask ourselves, is the extravagance of the address worth the extra money?

When the GLC was abolished in 1986, the grand, Ralph Knott designed “Edwardian Baroque” building located on the south bank of the Thames became surplus to requirements. The site was eventually sold in 1992 to the Japanese property developer Shirayama for a reported £60m – just before a recession and property slump. Given the economic climate, this figure raised a few eyebrows in the property world and some were concerned that Shirayama would not have the money to convert the building, having already spent so much to procure it. With hindsight it was a solid investment. The luxury hotel, aquarium, museum, exhibition space and restaurants attract over 17million visitors a year. The converted flats sell for around £800 – £900 a square foot – outside of the popular Shad Thames, these levels are uncommon for the SE1 postcode. These well-located flats, in the handsome Portland Stone building with excellent views have never failed to attract buyers and tenants.

Last year it was announced that the long term viability of the Houses of Parliament as the seat of British government was being questioned. Having always been an expensive place to run, the whole building is suffering from subsidence, and is slowly sliding into the River Thames. Thought to have been affected by the excavation of the Jubilee Line extension in the 1990s, and the underground car parking complex on site, surveyors have said that repairs to the building would take at least five years to complete. Government accountants argue that it doesn’t make sense to spend an estimated £1billion to repair an estate that is worth £1billion, although I am sure that English Heritage might think otherwise.

The Houses of Parliament, if converted to commercial and residential premises would no doubt be an even more popular housing and property destination than County Hall.  With 872 ft of river frontage on a site of approximately 8 acres, the number of luxury residences that could be created would certainly tempt any number of wealthy buyers, many of whom would happily buy off-plan to own such a desirable piece of real estate in one of London’s best known buildings with the SW1 postcode to match. Proximity to Westminster tube, to the West End and the caché that comes with owning property in one of the world’s most iconic buildings would certainly create demand for any residential property that was available on site and it is likely that the price per square foot achieved would be well above the £1,500 average that this part of Westminster currently commands.

So it seems sometimes paying more for property in one of London’s best buildings can pay off, not to mention also giving you an address everyone will recognise and a home or business everyone will want to come and see. If you need Manse and Garret to locate a unique home for you or a unique addition to your property portfolio please don’t hesitate to get in touch.

Technorati Tags: Historic buildings, House prices in London, London property, Planning Permission, property market news, Westminster house prices

Tags: Historic buildings, House prices in London, London property, Planning Permission, property market news, Westminster house prices