Thoughts from our Property Experts

Change is afoot in the UK.  A more tax, more spend Autumn Budget has just happened and in our opinion there is likely to be more to come from the Labour Government.

We would not rule out a significant increase in council tax or another housing tax in the future.  If this was combined with a reduction in stamp tax then more property deals could happen and the economy would grow.  But don’t hold your breath, because self-serving politics often trumps sensible economics.

So what happened ?  

 

There were two main changes to Stamp Duty noted in the Budget: The nil rate threshold and second home duties (impacting landlords). The nil rate threshold will change at the end of March 2025. This will reduce the threshold from the current £250,000 to £125,000. For first time buyers it goes down from £425,000 to £300,000.  This does not really affect London.

Second home buyers and buy-to-let property buyers will pay a new stamp duty charge increased from 3% to 5% from 31st October 2024. The last-minute rush to execute property sales in progress has now passed. Second home buyers and investors already in the market to buy, appear to be continuing their searches. These changes may well impact property sales in resort and coastal areas of the UK. However, central London draws domestic and international buyers for business and lifestyle reasons so it is unlikely this market will slow down significantly. 

In addition, recently published long term house price forecasts are looking favourable with 20%+ uplift over the next 5 years. 

And don't forget, the Trump victory in the US election may cause an uplift in interest in the London market. Compared to the US, our tax structure remains favourable.

 

Changes to the UK’s Capital Gains Tax (CGT) structure are significant.

Lower rate on CGT on sales of assets will increase from 10% to 18%. 

Higher rate will increase from 18% to 24%. CGT on sale of residential property will increase from 18% to 24%.

 We expect to see some private landlords sell properties before the end of this financial year. That said, buy-to-let market activity is certainly regional in behaviour, and not all central London landlords are taking flight. Smaller landlords will consider their position vis a vis gearing and yield levels before considering a sale or indeed another purchase.

It is international residents in London who will be considering their position now regarding Non-Dom tax. The current Non-Dom scheme will be abolished by April 2025. A new Residency based scheme will be introduced, and we await the details of these changes. With approximately 83,000 residents in UK in 2022/23 benefiting from the current scheme, these residents are likely to be subject to tax on their worldwide income and gains from next year.

 

London must continue to compete Internationally as an attractive city destination. There is an ongoing need to provide the right incentives to attract wealthy international people to London and their contribution to the local city economy and employment.  

With Dubai, Monaco and Switzerland looking ever more attractive as a replacement for British Non-Dom residency, the prime London property market is bound to see some change ahead. But let’s not forget political volatility and unstable governments in some locations around the world may drive a new wave of international buyers into London. 

 

With the confirmation that Inheritance Tax will be frozen until 2030, there is time to plan for any future changes. UHNW and HNW Londoners typically have a higher proportion of their wealth tied up in property, so estate planning will be a top priority.

 

It is going to cost more to invest in prime property, to pay for a private education and to pass wealth on to families. Buying into a luxury London lifestyle is becoming less accessible. But London is a sought after destination.  Will this create a new wealthier tier of London residents?  Will London’s most exclusive neighbourhoods become even more exclusive? Scarcity and rarity of best-in-class homes for discerning buyers may well accelerate values for a proportion of the market. 

One thing is clear and that is with a higher cost of homes, now more than ever, international and domestic buyers and investors need the guidance and insight of an experienced property expert to help them navigate today's changing prime London market.