Priciest London Luxury Homes Lose Shine as Sellers Aim Too High

November 6, 2013 Leave a comment

Priciest London Luxury Homes Lose Shine as Sellers Aim Too High

Price gains for London’s most expensive homes have stalled this year as concerns about possible tax increases and high asking prices put off even the super rich. Houses and apartments valued at more than 15 million pounds ($24 million) showed almost no gain in the year through September, compared with rise of about 5 percent for properties from 1.8 million pounds to about 5 million pounds, broker Savills Plc said in a report today. Luxury residences outside central London rose by about 10 percent.“There are a lot of vendors out there who think their house is worth 3,000 pounds per foot because they’ve read that somewhere,” said Alex Michelin, a founder of luxury developer Finchatton Ltd. “The house that got 3,000 pounds was immaculate, brand new, had facilities and technology. Their flat is 20 years old.”

Luxury homes in central London will rise 23.1 percent through 2018, compared with a 25 percent increase for British residences overall, Savills (SVS) estimated. Properties worth more than 15 million pounds will climb at a slightly slower pace than the rest of the capital’s prime market and the U.K. as a whole, Lucian Cook, head of research at Savills, said in an interview yesterday. Prices at the top end of the London market will be supported by a lack of supply over that period, he said.

London luxury homes had been increasing since September 2009, according to the Savills data. Properties worth 15 million pounds or more showed little or no rise for the first time since about December 2009, the data showed.

Big Gains

Home values in London’s best areas including Mayfair, Knightsbridge, Belgravia and Chelsea increased at least 128 percent from mid-2005, compared with a fall of 19.3 percent in the value of all U.K. homes in the same period, broker Savills said in a September report.

Wealthy prospective buyers are being deterred by talk of higher taxes, Finchatton’s Michelin said. Chancellor of the Exchequer George Osborne raised a transaction tax to 7 percent from 5 percent for properties priced above 2 million pounds in March 2012. He is considering imposing capital-gains tax of foreign owners of U.K. property, Sky News reported last month.

“Clients are saying ‘well, are we welcome here?’” Michelin said. “That’s really what’s causing a pause in the market.”

Westminster Declines

Home prices in the borough of Westminster, which includes the affluent districts of Mayfair and St. James’s, have fallen for three months in a row through August, dropping from an average of 1.23 million pounds to 1.1 million pounds, researcher Acadametrics said in an Oct. 11 report.

Will Bax, director of Grosvenor Group Ltd.’s London assets, said he’s cautious about the market for homes worth 5 million pounds or more. The Grosvenor family’s ancestral London land holdings are in Mayfair and Belgravia, districts that are consistently among the world’s most expensive for leasing an office or buying a home.

Two years ago there “was an extraordinary market” for London luxury homes and demand led to a “kind of irrationalism that has probably been tapered slightly,” Bax said.

Top-tier buyers are “not in the mindset where they’re desperate to buy anything at any price,” said Liam Bailey, global head of residential research at London-based broker Knight Frank LLP. “There’s a slightly more sober mindset in that price bracket.”

To contact the reporters on this story: Neil Callanan in London at ncallanan@bloomberg.net; Patrick Gower in London at pgower@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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