Some wealthy London residents are leaving the city following tax changes. But the impact on the capital's prime property market is slight, says Knight Frank…
A thousand leave
Up to a thousand homes in London have been sold since October 2007 by high net worth individuals – HNWIs – and non-domiciled residents in the UK.
Changes to the UK tax regime have driven these sales, says a report by Knight Frank Residential Research.
First, the 2008 Budget announced an annual tax charge of £30,000 for resident non-domiciles who had lived in the UK for more than seven out of the last ten tax years.
In addition, the 2009 Budget levied a top rate 50% income tax on incomes over £150,000, plus a restriction of the income tax personal allowance for those earning more than £100,000.
Loss has limited impact
But the loss of some of its richest residents has had little impact on the central London prime property market.
This is because most people who have moved out still retain properties in London. Only 17% of non-domiciled residents and 3% of the HNWIs who have left the capital have sold all their properties.
Most leavers intend either to keep their main homes, or some of their property portfolio – and there are more wealthy owners planning to expand their portfolios than there are owners thinking about selling up.
New buyers moving in
The prime London market has also managed to absorb the changes, says Knight Frank, because although the very wealthy are unhappy with the tax increases, their location decisions are more closely tied with broader perceptions of the strength of the UK economy.
This, and the dip in Sterling, has ensured that London has remained an attractive destination.
Indeed, in recent months, demand from foreign buyers, who are more than willing to step into the shoes of those who are leaving, has increased.
Knight Frank reports that whereas about 55% of properties selling for over £3m would normally go to people from abroad, at present foreign buyers account for nearly 70% of sales of the most expensive properties.