High stamp duty rates are prompting wealthy buyers to reconsider renting rather than purchasing property in London’s prime market, according to industry analysis.
Non-UK residents purchasing additional property in London currently face stamp duty land tax (SDLT) rates of up to 19%. For a £20 million property, this equates to £3.8 million in tax, rising to £5.7 million for a £30 million purchase.
Trevor Abrahmsohn, writing in a market commentary, noted that since reforms introduced in 2014, successive governments have increased taxation on prime London property purchases through additional surcharges and rate adjustments.
Running costs and market performance
Beyond acquisition costs, properties at this price point typically incur annual running costs of £500,000 or more for maintenance of security systems, swimming pools, lifts, air conditioning, and landscaping.
The prime London property market has experienced stagnation in recent years, with some properties now declining in value. This contrasts with previous periods when capital appreciation offset high entry costs and ongoing expenses.
The combination of high SDLT rates and uncertain capital growth has created a financial case for renting rather than purchasing for international buyers planning to remain in the UK for a fixed period, typically around five years.
Rental market dynamics
For a five-year residency, the total rent paid can approximate the stamp duty that would have been incurred on a purchase, whilst avoiding property ownership costs and legislative risks. This approach also allows capital to remain invested elsewhere.
Recent changes to rental legislation have affected the buy-to-let sector, though assured shorthold tenancy agreements in the prime market operate differently from standard residential lettings covered by new rental regulations.
Amit Soni, who heads Glentree Rentals, has handled a number of high-value lettings in the North-West London corridor. Recent transactions include the letting of Beaulieu in Courtenay Avenue, previously occupied by footballer Harry Kane and Ocado founder Tim Steiner.
The firm has arranged rentals for various international clients, with properties typically transacted through private channels rather than open market listings.
Market implications
The shift towards renting in the ultra-prime segment reflects broader challenges in London’s high-end property market, where asking prices have shown recent declines. The current tax structure, combined with uncertain capital appreciation, has altered the traditional calculation for international property buyers.
For landlords, the rental market at this level continues to provide income opportunities, though they retain responsibility for maintenance and property management costs that tenants avoid.
