Tuesday, 26 February 2013

PCLR impact on London LNWIs and HNWIs: Acronym soup

London's journalists enjoy conjuring acronyms to tribalise the city's different people, writes Paul Coleman.
  During the post-‘Big Bang’ era, we invented the 'Yuppy’, the 'Young Urban Professional' puppy. Then came the ‘DINKY’ tribe – ‘Double Income No Kids Yet’.
   And, latterly, the media demonises working people on lower incomes as ‘Chavs’ – or ‘Council Housed And Violent’, according to some definitions. 

High Net Worth Individuals 
HNWIs, or ‘High Net Worth Individuals’, refers to Planet Earth’s affluent folk who congregate in Hong Kong, Melbourne, Mumbai, New York, Paris, Rio de Janeiro, Shanghai, Singapore and, of course, in ‘prime resi’ central London.
   Apparently – and so we must weep – HNWIs trying to buy a modest £2 million property in any one of those cities are hindered by a range of costs and obstacles.
   Apparently too – and so we must rejoice – London rates joint second with Hong Kong in a Savills survey of the best cities for HNWIs to buy property. New York comes out slightly on top.
   London levies £144,000 on a £2m home, including 7% stamp duty, or 15% if HNWIs buy via an offshore company. HNWIs also get nipped for another £4,000 on Land Registry, legal and survey costs. Let’s not forget annual Council Tax of between £1,500 and £4,000. 

We’re not quite finished either. From this April, HNWIs with a slab of ‘prime central London resi’ valued at £2m and over, bought wholly or partly via a company, will be subject to a new Annual Residential Property Tax. For instance, prime Kensington properties worth £2m-£5m will incur £15,000 ARPT.
   ‘Prime resi’ homes in the top band of £20m and over will cost £140,000 per year. Future owners of the £70m valued Eaton Square property (see yesterday’s post) might end up with this bill. Hey, HNWIs – guys - best buy with cash.

London's HNWI offer 
Rio is cheapest for HNWIs to buy a £2m property with taxes and costs levied up to £52,000. But London offers HNWIs lower crime, better schools and, crucially, sustainable property values.
   Property agent Knight Frank reckons 73% of new PCLR – Prime Central London Resi’, (c’mon keep up) – homes in 2012 were bought by foreign HNWIs, mainly Singaporeans.
   But what factors seem to sustain central London’s ‘prime resi’ high values – especially since the financial meltdown of 2007-09 damaged every other slice of the global economy? 
And, by definition, if HNWIs exist, so too must ‘Low Net Worth Individuals’. How does a booming PCLR market affect London's LNWIs? 

Reflections on possible answers to follow future postings. 

Paul Coleman, London Intelligence, February 2013

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