PCL Falters
LonRes reported Prime Central London sold prices are down annually by 5.1%.
Increasing price reductions (table below) indicate fewer stubborn sellers holding out at unrealistic prices. This does not mean buyers should feel a sense of urgency.
Non-Dom Tax Changes
The upcoming abolition of the non-dom tax regime in 2025 may reduce demand for London’s most expensive properties.
Non-doms are UK residents domiciled outside of the UK for tax purposes. There are circa 74,000 in the UK with many based in central London. The government claims upcoming tax changes in 2025 will keep the UK internationally competitive but simply put, most remaining non-doms will pay more tax.
The market implications are uncertain. UHNW families leaving London will not necessarily sell their asset while others may simply lower their budget to cover the additional tax. There are more tax friendly regimes around the world but that has always been the case. Italy’s current system is very welcoming to wealthy individuals but most people neither speak Italian nor let tax efficiencies dictate their lifestyle.
However on balance there will likely be downward pressure on house prices in neighbourhoods with more non-doms such as Knightsbridge and Belgravia. A LonRes survey recently showed demand is falling for the most expensive properties.
Areas with more domestic demand such as Hampstead and Islington should be less affected. Further afield in North and East London, we are seeing a more resilient market. This month we had to secure a property via sealed bids against 3 competing bidders.
Share of Freehold’s Shortcoming
In the past month, we have viewed Share of Freehold flats with exposed wiring, neglected windows and carpets from the last century!
We often act for clients with an understandable preference for Share of Freehold. Owning your flat and a portion of the underlying land is attractive but comes with additional responsibility. While lower service charges are generally a plus, don’t be swayed by very cheap service charges which only cover the buildings insurance contribution. A selling agent will happily tell you major works are dealt with by owners on an ad hoc basis but the reality is rarely that straightforward. It is risky to assume all building owners will independently build up their own reserve funds to cover a revamp of communal areas or a new roof in ten years’ time. This is why Shares of Freehold are often in a worse state of repair than leaseholds. Especially in larger Share of Freehold blocks, a management company can still offer an invaluable service.
We have covered the pros and cons of Leasehold, Share of Freehold and Freehold in a previous blog.
Low Traffic Neighbourhoods
The Evening Standard reported London councils have been given funds for 30 new Low Traffic Neighbourhoods (LTNs).
Despite the surrounding controversy, clean air policies are nothing new in the UK which introduced the world’s first clean air act in 1956. In fact you can go as far back as 1273 to find parliament banning the burning of soft coal!
Whatever your opinion of such schemes, it is clear that LTN neighbourhoods provide a better environment for homeowners and outperform streets dominated by traffic. Today, Hackney and Islington which have invested heavily in LTNs are among London’s least polluted boroughs.
Just as broadband speed is now shown on property portals, expect local air quality data to increasingly inform homebuyers’ decision making.
