MortgagesJan 16 2013

Safe as houses

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Not surprisingly a significant proportion of those are based in London, making up 64 per cent of the 300,142 property millionaire across the country.

The most successful borough in terms of million-plus properties is Kensington and Chelsea, with the most expensive street being Kensington Palace Gardens where the average home on the street is worth more than £25m.

Kensington and Chelsea has the most property millionaires - 36,293 or 12 per cent. This is closely followed by the borough of Westminster, which includes Mayfair and Park Lane, followed by Camden, which has Primrose Hill, housing millionaires such as Jamie Oliver.

The dominance of London on the list of property ownership is highlighted by Nationwide in its housing market figures early in January. Here the London average of £300,361 is nearly twice the national average of £162,924.

However, despite the recent history of billionaires buying up London’s expensive property, the reality is a little more prosaic.

Adam Challis, head of research for Hamptons International, said: “Increasingly the million pound-plus space is really about the successful middle class than the perception of the super wealthy. You could describe purchasers as regular folk and in many cases people who have been successful in business. Talking about very rich people is not necessarily the case.”

These are generally people who have made astute property decisions throughout their life, rather than being the recipient of a sudden windfall.

Mr Challis said: “With purchasers of high-value stock, it’s lower loan-to-value ratios. These are folk that have built up significant equity in other properties. The debt they take on is going to relate to how cheap it is, although there are plenty of high LTV purchases on high-value properties.”

Alex Dungar, director of West Sussex Compton Row Financial Services, has a number of high net-worth clients who have bought high-value properties. He has noticed an increase in the number of clients who want to invest more money into property since the financial crisis.

He said: “Everybody has noticed that property is a more secure, less volatile investment than it was prior to the crash. Before the crash people had a higher risk appetite than they do now. Property gives people an overall sense of wellbeing.”

This has extended to outside the million pound-plus property. He said: “We’ve certainly noticed that investors are incorporating buy-to-let properties into their portfolios for income generation as part of their diversification. With annuity rates being as poor as they are, returns on property are now a more important sector of their investment planning than they might otherwise have been.”

In his area, southeast England, the number of property millionaires is also substantial, with 61,586, coming second after London, according to the Zoopla survey. The lowest number was Wales with 844. But perhaps what is noticeable is that every region of England saw a rise in the number of property millionaires.

This is despite the fact that last year saw sluggish progress on the wider housing market in general.

But the million pound-plus property market has been affected by government initiatives to claw back more tax from the wealthy and clampdown on aggressivetax avoidance.

In 2011, the 5 per cent stamp duty was introduced for £1m-plus properties, and from March last year a rise from 5 per cent to 7 per cent on £2m properties. In addition there was a 15 per cent charge on properties owned by ‘non-natural persons’ on properties valued at more than £2m, primarily corporate structures.

Mr Challis said: “Each of these has changed the game in terms of the cost of transaction and the reality is that the market has largely absorbed these changes against the movement of house prices. People have accepted these as part and parcel of house price.”

There are now other charges in the offing. There are still questions on the stamp duty rules, and the expectation is that, given the perception that it was quite heavy-handed in its approach, the rules may be refined.

In addition there is the proposal for an annual charge on properties worth £2m upwards owned by ‘non-natural persons’, which is due to take effect from this April.

The proposed charges range from £15,000 for properties worth £2m to £5m, £35,000 for properties worth £5m to £10m, £70,000 for properties worth £10m to £20m and £140,000 for properties worth more than £20m. It is fairly certain that this proposal will go ahead, with the caveat that certain professional investors would be exempt.

Another potential change is the imposition of a capital gains tax charge on the sale by offshore companies and trusts of UK residential property worth more than £2m. Vince Cable, the business secretary, has also suggested the imposition of a ‘mansion tax’.

The idea behind these measures is to prevent people from buying residential properties through a corporate vehicle, installing an elderly relative as an occupant and avoiding tax. But the problem is that the measures and the uncertainty surrounding them have prompted a lot of caution in the market.

Mr Challis continued: “Because the government said: ‘We’re considering this but we will figure it out by Budget 2013’, prospective purchasers said: ‘It could be damaging but I will wait.’ They created uncertainty and it allowed a big chunk of the market to say: ‘Why don’t I wait until we’ve got more clarity.’ ”

Nevertheless, property is still seen as a safe haven. David Hollingworth, head of communications for London & Country Mortgages, said: “It’s where investors want their cash because they feel property is something of a safe bet. It will hold its value or continue to increase. There’s going to be winners and losers and there’s no reason to say why it won’t be London and the southeast as the main winners.”

For Mr Dungar, the people he sees buying expensive properties bears this out. He said: “Most of them are either retired individuals or people who are working towards retirement, who are perhaps looking to build a diversified income source. For them buying property is quite an important investment.”

London and the southeast may be easiest to predict as the place which has the most property owners as millionaires. But as stock markets have become more volatile so property has increased in its profile as a safe, bankable asset.

Melanie Tringham is features editor of Financial Adviser

Key points

Zoopla.co.uk, the property website, suggests that there are now 300,000 property millionaires in Britain.

An adviser has noticed an increase in the number of clients wanting to invest more money into property since the financial crisis.

The million pound-plus property market has been affected by government initiatives to claw back more tax from the wealthy and clampdown on tax avoidance.