16 Mar Prime central London remains one of the best global real estate investments, it is claimed
Not only is the prime central London property market a stellar performer in the context of the UK property market and other asset classes, but recent statistics from Knight Frank revealed that London’s property market has topped some of the best international property markets as well.It has significantly outperforming the likes of New York and Paris since 2009, only Jakarta, Hong Kong and Beijing, were said to show prices rising faster.However, new data from property managers London Central Portfolio shows that, when pitted against other major urban centres around the world over the longer term, it is not only a chief player but a much more consistent and less volatile performer.
Top end London property has been a good addition to investment portfolios, not just over the recent credit crunch but over the past four decades. In the two most exclusive boroughs, the City of Westminster and the Royal Borough of Kensington and Chelsea, values have risen 9% per annum since 1996 and are up 42% since their pre credit crunch low.Many commentators have likened this growth to a housing bubble waiting to burst, suggesting that the underlying growth trends are atypical and therefore unsustainable.
However, according to LCP, this view point is derived from, firstly, a mistaken view that the prime central London is correlated to the UK housing market, when in fact, it is no longer just the capital of the UK but rather a capital of the world, and secondly, it is based on a short termist view of the market. The firm reckons that with Singapore’s performance lagging well behind and Manhattan’s price growth all but flat lining, Hong Kong is the only major player to match prime central London property price growth over the longer term. Prices here are up 191% since 2000 compared to 182% in London, however it says that the market is exceptionally volatile bringing with it lucky winners and desperate losers.‘Both Hong Kong and Singapore’s housing markets react dramatically in times of economic uncertainty and they saw prices plummet 50% and 77% respectively in one year, during the credit crunch.
This compares with just 11% in prime central London,’ the firm says in its latest analysis report.‘With an already draconian US tax regime and significant changes to taxation on property in Hong Kong, Singapore and the UK, clearly none of the key global markets are out of harm’s way,’ it adds.It also points out that Singapore recently raised Stamp Duty tax on foreign and corporate buyers from 10% to 15%, only a year after it was first introduced
They also piled on an additional Stamp Duty, taxing their permanent residents between 5% and 7% across all price bands.And in Hong Kong, in order to contain rising prices fuelled by rampant speculation and the influx of foreign investors, particularly from the Chinese mainland, the government has introduced a special sellers Stamp Duty of up to 20% on the sale of short term owned properties. In addition they are introducing a 15% buyers Stamp Duty on local and non-local companies. ‘In light of the significantly increased taxes, prices look set to fall once again just as they did when the taxes were first introduced in 2010,’ the report says
The UK, too, saw additional taxes on property last year with a combined objective of revenue raising and disincentivising purchases through companies. The Chancellor increased Stamp Duty to 15% for companies and revealed plans to impose an annual charge of up to £140,000 per annum on properties held by these companies. This sent a frisson of uncertainty around the world for investors who had always seen the UK as a stable economic and political environment
‘The Chancellor’s recent decision to exclude bone fide businesses from this tax rise, in recognition of the multi-billion contribution the sector makes to the UK economy, should bring in vital inward investment again,’ says the report.The Chancellor also increased Stamp Duty from 5% to 7% for people buying properties over £2 million. ‘This was inevitably a tax on London, where 77% of such properties are located. As a result, sales outside the two most central boroughs, where most domestic buyers are located, decreased in the £2 million to £5 million sector by a staggering 57% last quarter. This resulted in a net loss of tax revenue which if extrapolated over the year would amount to £203 million. As the Chancellor eyes up ways to increase the Exchequer’s take in the next Budget next month, he might feel the urge to copy Singapore and Hong Kong with further swingeing property taxes. It would be an all too easy sleight of hand to increase Stamp Duty by 1% to 5% on properties over half a million and to 6% on properties over £1 million,’ the report points out.‘Hopefully, however, Osborne will remember the lessons of last year and get his calculator out first. He will see that another rise in Stamp Duty could have a devastating effect on an already sluggish domestic property market and that a repeat of 2012 would result in a net fall in tax take of about £202 million for an already beleaguered UK economy,’ it concludes.
(Propertywire, 26th Febryary 2013)