’The decline of London’s prime property market ought to ring alarm bells for the best way the capital is heading’ – ScottyH/iStockphoto
The damaging impression of Rachel Reeves as Chancellor continues to be revealed in each nook and cranny of the financial system.
The place her Conservative predecessor, Jeremy Hunt, went fallacious, Reeves has doubled down and multiplied the errors. The ending of non-dom status and the tax increases that particularly punish the wealthiest are working their manner by the financial system and making us all poorer.
Whereas this development could be introduced as excellent news for purchasers in search of a cut price, it indicators folks exiting the market and offers proof of what occurs when 1000’s of millionaires and billionaires depart the UK for cities resembling Dubai or a quieter life within the Channel Islands.
The newest Coutts London Prime Property index for This fall of 2024 ought to ring alarm bells for the best way the capital is heading and what the story it tells concerning the UK as an entire.
It’s common for politicians and commentators like myself to give attention to the massive, generalised numbers of gross home product, inflation and unemployment as a type of shorthand to attempt to perceive and describe the well being of an financial system.
They’re, nevertheless, the sum of many components – resembling items or companies, meals and vitality prices, or manufacturing and hospitality – and inside these classifications stay many particular person sectors.
By wanting on the financial knowledge in smaller markets, creating developments might help clarify how adjustments in taxes, legal guidelines and new methods of doing issues are making a distinction can play out throughout the financial system.
London’s tremendous prime residential property market is outlined as houses value £10m or extra. Coutts describes the market as “flourishing”, presumably on the idea that extra properties are being offered, however the look of serious reductions towards asking costs above £1m or extra tells the true story. There are extra sellers than consumers.
What Hunt began Reeves has excelled at, encouraging the wealthiest, and their consumption of property, items and companies, to flee the capital – taking their spending and all the roles it creates and the tax revenues it brings to depart our shores.
Coutts reviews “the variety of tremendous prime properties offered in London within the final three months of 2024 greater than doubled in comparison with the identical interval the earlier 12 months – regardless of adjustments introduced within the authorities’s Autumn Finances”.
The fact may be the development has now accelerated due to the Chancellor’s October Finances, not regardless of it.
Certainly I might go additional and counsel the interregnum between the start of July and the top of October, when Rachel Reeves talked down the state of the general public funds and the financial system, instantly inspired worry and hypothesis about which taxes she must improve and the way far more she would search to borrow.
In such circumstances, many excessive net-worth people may have concluded it was time to promote up in London and attempt to full as rapidly as potential to keep away from any adjustments to capital beneficial properties tax, stamp responsibility and inheritance tax.
Due to Hunt getting the ball rolling, 1000’s of non-doms had been already on that journey. The next rises in capital beneficial properties tax, stamp responsibility and adjustments to inheritance tax by Reeves – have solely added gasoline to the fireplace.
This narrative is evidenced by the rise in capital beneficial properties tax property sale revenues which surged by 16.3pc between July and September final 12 months (from £492m in Q3 2023 to £572m Q3 2024) as homeowners of property sought to beat any improve within the tax.
Finally, whereas Reeves introduced a rise within the charges of capital beneficial properties tax, she excluded residential properties from the measure. As a substitute, she increased stamp duty by 2pc across all rates, leading to properties promoting for greater than £1.5m attracting a punishing stamp responsibility cost of 17pc. Each measures had been with rapid impact.
The Coutts survey knowledge for This fall of 2024 discovered that three out of 4 (76pc) of prime London properties offered at a reduction towards the asking value, and that on common, consumers negotiated a reduction of 8.9pc – up from a reduction of 8.6pc within the earlier quarter.
That’s a falling market, not a climbing one. There was a 31pc rise in gross sales volumes in comparison with earlier 12 months, which factors to extra homeowners upping sticks, due to the Reeves impact and helped improve the necessity for reductions.
In comparison with This fall in 2023, London prime property costs for 2024 had been down 2.9pc and are on common 8.4pc beneath the market peak in 2014.
For a lot of causes, London will proceed to supply points of interest to rich folks internationally – its frequent regulation and English language, its historic and cultural property, and its location to do enterprise and educate kids are simply a few of many way of life and strategic pull-factors. Now we should embrace in that checklist prime and tremendous prime properties accessible at a reduction.
With the greenback climbing towards sterling and reductions accessible from these eager to promote up and transfer out, we will count on to see new overseas consumers such London properties as an funding.
As long as tax adjustments don’t discourage them, new purchasers may take a long-term strategic view that purchasing such unique properties at a reduced low will enable them to make a good-looking revenue possibly 10 years sooner or later. They’d after all be taking a wager that issues gained’t get even worse.
Ending non-dom status has been estimated by the Adam Smith Institute as costing the Treasury £6.5bn in tax revenues and 23,000 jobs by 2035, and partly explains the capital flight from the UK as we undergo the second highest lack of millionaires on this planet, with solely China dropping extra.
There is no such thing as a doubt Reeves is already buckling below the strain of the injury her October Finances has wrought to the British financial system. Having confirmed the ending of non-dom standing, Reeves made some inconsequential adjustments that can make little distinction to the outcomes, however confirmed she recognises she made a critical misstep
The discounting prime property market is likely to be good for some purchasers nevertheless it factors to the continued if not accelerating departure of excessive internet value people from our shores and the tax revenues, jobs and prosperity they bring about going with them.
Solely Keir Starmer can change the course of journey by altering his Chancellor, however so far Rachel Reeves has his each confidence and people of us who stay within the UK all have to smile and bear it.
