Wealthy Londoners Turn to the Private Rental Sector

The number of wealthy Londoners looking to rent their homes rather than buy has risen by a third in the past year, according to Knight Frank.

The estate agent reports that super-rich renters are flooding the private rental sector, as the number of tenants moving into homes worth more than £10m has soared over the last 12 months.

Higher Stamp Duty rates and a drop in house prices in the capital’s wealthiest areas have caused the jump, believes Knight Frank.

However, letting agents believe that concerns over the forthcoming EU referendum and the recent Panama offshore tax scandal are prompting the super-rich to rent rather than buy.

Indeed, we recently reported that the EU referendum and Stamp Duty changes could bring house prices and sales down.

Knight Frank conducted research on the prime central London market between March 2015 and March 2016. It found that sales of homes worth £10m or more have dropped by 33%.

Under Stamp Duty changes from 2014, buyers of a £15m property will be charged around £1.7m in the tax, which is around three years worth of rent for a similarly priced house.

Additionally, Stamp Duty is now even higher for those buying second homes or buy-to-let properties. As of 1^st April, these buyers will be charged an extra 3% in Stamp Duty.

Property expert Henry Pryor says: “No one is predicting that homes at the top end will be worth 10% more in the near future and most people think they will be worth less.

“It is much easier to make a decision to rent and make sure that if you do buy, it’s something you really want.”

Knight Frank also reports that yields for landlords of properties costing £5,000 per week in rent can go above 4% in areas such as South Kensington, Knightsbridge, Mayfair, Holland Park and Regent’s Park.

Pryor adds that the recent Panama Papers scandal means “no one can buy quietly”¹ anymore, which is putting buyers off.

Knight Frank warns landlords of pricey homes to expect high-maintenance tenants moving into their properties.

¹ http://www.dailymail.co.uk/news/article-3544889/Rise-super-rich-renters-Number-lettings-homes-worth-10m-year-wealthiest-avoid-stamp-duty-increase-fears-grow-Brexit.html