Even though the global economy is still in a worrying state and position around the world, there are pockets of places that are achieving success and making financial progress. Cities like New York and London are achieving peak levels which haven’t been seen since before the crash and other markets such as Hong Kong, Monaco, Geneva and Singapore are ranking amongst the most expensive markets in the world. From these facts, it is easy to see that London is not alone in experiencing such a strong spike in the level of house prices.
While rising house prices are good for some people, they are not of benefit to everyone. With the price of a London home more than doubling in price since 2005, this has led to many people being forced out of the market. Leading estate agent Savils reported than house prices have risen by 107% since 2005. While this is a shocking growth, it pales in comparison with the surge in house prices in Singapore in the same time scale. There has been a rise in house prices of 242% in Singapore and at the latest figures; Hong Kong is the market with the dearest properties in the world. While many people in London and across the UK are being priced out of the London property, investors in Singapore and Hong Kong are finding that the London property market is offering a greater return on their investment. This allows these wealthy people the opportunity to snap up homes that are of value but this places even greater pressure on to the London property market.
There are many factors that are impacting on the property prices in the major cities. It would be wrong to overlook the low level of interest rates when determining the reason behind the explosion in property prices. There is also the fact that foreign buyers consider property buying as an investment and a tangible way to park their money. This is another reason why many people, either of their own accord or through their financial advisors are leaving their own market and coming to cities like London to snap up property.
Council tax is a major feature in the London property market
With respect to property tax, buying London property is extremely attractive. For a London property with a $15m price-tag, the level of property tax paid in the UK equates to around $16,000. This compares tremendously well with respect to Hong Kong, where property tax for a similar property would come in at over $95,000. In Singapore, the property tax on this level of property would come in at $121,907 and for New York, the owner of a $15m property, would be looking at paying tax of around $1.43m! In London, the fact that the local council tax, as opposed to a property tax based on the property’s value makes such a massive difference. This saving alone is enough to make many foreign investors decide that London is the location they need to be in.
While the first instinct is to look at the price of properties, there is no doubt that the social impact is a big talking point from the way that these major markets are shaping up. Hong Kong is a lot like London in that the level of public housing is insufficient for its needs and it is still expensive. This is the situation many Londoners face. The rise in prices for the London property market sees many people unable to afford a mortgage but it is not as if the rental market is more affordable or appealing. When there is such a gap between the rich and the poor in one localised area, there will be a high level of unrest and concern.
This is why there is such a focus on producing affordable housing for as many people as possible in London. While the major development firms may be able to focus solely on their executive clients, most operators in the London property market understand the need to cater for people across the board.
Solely focusing on the executive level of the property market will lead to an inevitable crash in the market, which is something to be avoided. At the moment, London is a major draw for many investors around the world but there is a need to focus on all potential buyers in the London property market.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 8 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.
Marty Huggins
