The United Kingdom of Great Britain and Northern Ireland is a sovereign state in northern Europe which includes England, Wales, Scotland and Northern Ireland. It is governed under a constitutional monarchy and a democratic parliamentary system made up of two houses; an elected House of Commons and an appointed House of Lords. It has a population of more than 62 million and has the world's seventh-largest economy by nominal GDP. It is predominantly a Christian country, although successive waves of migration have contributed to the growth of other faiths. It is a member of the European Union as well as the Commonwealth of Nations, the Council of Europe, G7, G8, G20, NATO, the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization.
Sales of luxury British homes surge despite tax increase
Increase in stamp duty on prime real estate has little effect, with overseas buyers in search of a safe haven flocking to London
The British government's plan to raise a tax on luxury-home purchases sparked a last-minute dash by real estate brokers to wrap up deals before the deadline hit in March. They needn't have bothered.
Sales of homes valued at £2 million (HK$24.83 million) more than doubled in May from a year earlier, according to Land Registry data. After a 40 per cent decline in April, sales rose as investors from mainland Europe and the Middle East took advantage of Britain's status as a haven from economic and political turmoil.
"Money is leaving the euro zone and being spent on a safe asset," Matthew Pointon, an economist at researcher Capital Economics, said. "Safe-haven flows outweigh the increase in the stamp duty."
Luxury homes have held their value better than cheaper residential properties in Britain because of a scarcity of prime real estate for sale, particularly in London. That has led to record prices being paid for homes in the Mayfair, Kensington and Knightsbridge districts.
Finance minister George Osborne's annual budget targeted luxury home purchases to help narrow Britain's record deficit. He raised a transaction tax known as stamp duty on homes sold for more than £2 million to 7 per cent from 5 per cent. The use of corporations set up in offshore tax havens such as the Cayman Islands to avoid the tax spawned a 15 per cent levy on purchases of homes by companies.
In May, 113 houses and flats in Britain sold for more than £2 million, up from 45 a year earlier, according to the Land Registry. In London, sales jumped to 97 from 40, led by overseas buyers.
Homes valued at £10 million or more gained 2.9 per cent in price in the three months after Prime Minister David Cameron's Conservative-led coalition increased the stamp duty, London-based Knight Frank estimates. Home prices in London's most expensive areas have gained 49 per cent since a March 2009 low point and are now 14 per cent higher than the previous peak in 2008, the property broker said.
"London has been extremely hot," Yolande Barnes, head of residential research at broker Savills, said. "This was a record quarter, but it's been pretty strong even before that."
Small tax increases for ultra-wealthy individuals aren't likely to deter them from buying luxury residences in central London, according to Charles Leigh, a director at broker CB Richard Ellis.
"A per cent here or there isn't a major threat," Leigh said.
There are 10,760 ultra-high-net-worth individuals living in Britain, according to Wealth-X, which works with luxury brands and banks to build a database of people who collectively hold US$10.7 trillion of wealth. They're defined as residents of Britain with net worth of at least US$30 million, and together have combined assets of US$1.3 trillion.
London is home to 5,955 "ultra-wealthy" people, more than twice as many as Paris, which has 2,820, according to Wealth-X. Zurich ranks third among European cities with 1,775.
Aldine Honey, proprietor of her own luxury real estate brokerage, handled the sale of a £28.1 million home in London's Mayfair neighbourhood in May.
"It's extraordinarily positive considering the 7 per cent stamp duty," Honey said. "Wealthy people still consider London a safe haven."
Britain's government is considering an extension of a capital-gains tax on homes valued at more than £2 million held by unnaturalised non-residents. Some brokers, such as W. A. Ellis, aren't sure that overseas investors can withstand further taxes on Britain's luxury homes. Some property owners may want to get out while they can, said Richard Barber, a partner at the firm.
"You're not going to want to get stumped for capital gains," Barber said.
Doubts about whether luxury home prices can maintain upward momentum have arisen amid a predicted wave of new building. Builders plan to complete more than 15,000 houses and flats in London over the next decade to keep up with demand for properties in the traditional prime neighbourhoods, according to consulting firm EC Harris.
Prime Minister David Cameron is loosening requirements on homebuilders to allow them to build projects that are presently unprofitable as he seeks to pull Britain out of recession. Britain's economic growth slowed in the three months through to the end of August and "significant downside risks" remain, the National Institute of Economic and Social Research said.
The 10-year development pipeline increased 70 per cent from a year earlier and firms now expect to construct homes worth £38 billion, EC Harris said. About 3,800 units are expected to be finished in 2016, more than seven times this year's total of 500.
"There may be a question mark about the sustainability of some of the price growth we've seen in the last year or two in certain areas of super-prime London, which has been phenomenal," said Mark Farmer, head of residential at EC Harris.
A flat at One Hyde Park, Britain's most expensive residential complex, was put up for sale this month with an asking price of £65 million. The 9,000 sq ft property in Knightsbridge has four bedrooms and takes up an entire floor of the building.
"The main feature of any of these deals and the prices they're achieving is that there's such little stock" of luxury homes available, Honey said.