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Tuesday, November 18, 2014

Can we already see the end of London's luxury property boom?

London's luxury real estate market
A mansion tax would make luxury property more expensive
By Trevor Crowe

Properties in Mayfair

London has a certain appeal. It is, after all, widely considered as one of the world’s greatest cities and has a reputation and history for both culture and business that landmarks it as a definite place to visit, and, for some, as a place to come and live.

With such a reputation it can hardly be surprising that, alongside cities such as New York, Hong Kong and, maybe somewhat surprisingly, Moscow, London plays host to some of the world’s richest men and women.

In fact, a recent report suggests that London has more than its fair share of billionaires, ranking at number one for the most billionaire inhabitants.

So why, when reports show that large, luxury apartments are still being planned, constructed and sold, is there any doubt over the continuing prominence of London’s luxury property market?
The reasoning, it seems, is largely political.

Property problems

A good deal of the billionaires (and indeed millionaires) residing in London are not British. And even those that are unlikely to have any problems with finding alternative places to live. The people that claim London as their main home do so because it is, currently, a sensible choice. The properties are beautifully designed, well-constructed and often central (Mayfair) with good links to most of London.
Proposed legislation, however, would encourage current residents to pack up their chandeliers and spend their money more wisely in other areas of the world. You see, whilst such property owners have a lot of money, they aren’t necessarily very keen on spending more of it than they need to – the controversial ‘Mansion Tax’, has people talking.

The tax would likely deliver rather negligible bills to the plush door mats of properties that are worth in excess of £2 million, but on principle, some property owners would be hesitant to cough up. Should luxury property owners decide to seek residence elsewhere, where there is no Mansion Tax, the British property market, and general economy could suffer enormously?

In addition to the threats of a Mansion Tax are the ominous discussions about immigration and ‘foreigners’ - an ongoing onslaught of press that does not paint Britain, nor its occupants, in the best light.

The end of luxury in London

The thing is, even if these controversial views and legislations aren’t realised in the wake of the next general election, London is experiencing another problem to hinder further growth of the luxury market. The pound is getting stronger.

As such, this makes foreign currencies, most notably from the Middle East and China, significantly weaker, meaning their money doesn’t go nearly as far. Whilst we believe that the very richest of businessmen and women from these countries will not necessarily be put off by the extra money needed, we do wonder whether they will consider suitable alternatives, thus feeding competition cities.

As it stands there are plenty of luxury developments still being planned and built in Mayfair and other, equally opulent, areas around London, and there are still people buying them. But depending on how the next chapter of British history pans out will surely have a noticeable effect upon the number of luxury properties we continue to sell, and continue to build.

About the author: Trevor Crowe is the Branch Manager at the sales and letting agents - Balgores Basildon. With London’s property market being a hot topic in property land, Trevor takes a keen interest in what is going on in the industry.

Image: Newkemail/FreeImages.com; "London" Royalty Free or iStock