The departure of non-domiciled individuals is negatively impacting the real estate sector in London
Here's the Rewritten Article:
- London's Exodus of the Wealthy: A Housing Market Disaster in the Making? - By James Evans, CEO of Douglas & Gordon
The UK's steep taxes and regulatory burdens on landlords are pushing the wealthy to ditch London, causing ripples throughout the housing market, as James Evans, Editor-in-Chief of City AM, explains. with dire consequences for everyday Londoners.
Recent statistics show that non-dom populations are dwindling fast, and high-net-worth individuals are deserting the nation in droves - over 11,000 millionaires and 12 billionaires left the UK last year [1][2][5]. The fallout is already visible on the streets of London. Global investors, who once considered the city an investment haven, are fleeing to greener pastures. A stroll through a deserted, upscale Chelsea restaurant or a business trip overseas paints a bleak picture: Britain is closing shop.
The underlying cause? The government's unrelenting stance on taxation, marked by sustained increases in stamp duty, land tax, property taxes, and the Renters' Rights Bill [2][5]. These policies are squeezing many landlords to the point of cashing out, all in the name of leveling the playing field - but it's the ones who need help the most that suffer. Take the buy-to-let market, for instance. Two decades ago, it accounted for at least one in four of the properties I handled. Today, it's more like one in twenty - as investors look for greener returns elsewhere.
In today's world, the affluent can live and invest almost anywhere. With countries like the U.S., Asia, and Africa welcoming them with open arms, it's no wonder that property markets overseas are booming as Britons pack their bags.
The fallout? A dwindling rental supply and a pinch on those struggling to build a life in London - the baristas, the grads, the junior doctors - who spend more than half their salary on rent. Meanwhile, wages and London weighting allowances have yet to keep pace [3].
Dwindling Options
When landlords decide to sell up, stock disappears. Demand remains the same, pushing up rent in an already inflated market. As a result, poor living conditions have become the norm for many. In a desperate effort to keep up with skyrocketing rent, some turn to illegal sub-lets. Imagine six people crammed into a flat meant for three. It's a lose-lose situation for everyone involved.
Fleeing the mega-rich doesn't guarantee more affordable homes for average Londoners. A luxury pied-a-terre in Notting Hill is hardly a viable alternative for a young family in need of a two-bedroom in Tooting. The top end of the market is already quieter in the current climate, meaning governments should think twice before making things even worse.
Wealthy individuals contribute more than just cash to an economy. They spend, they renovate, and they create jobs. When they move on, not only do they take their money with them, but so does the vibrancy and opportunities that London thrives on.
So, what's the solution? Taxation policies must be reconsidered to encourage movement and investment. Instead of temporary measures like tax holidays that lead to price volatility, a more appealing property taxation system is needed to stimulate the market [4].
When the market is alive and well, everyone gains - from buyers and sellers to tradespeople, landlords, and tenants. It's time for the government to create the right environment for investment, send the right message to international investors, and let London thrive once again.
Sources:[1] Guardian, " millionaires flee from uk at fastest rate in a decade," 2023, https://www.theguardian.com/business/2023/jan/02/millionaires-flee-from-uk-at-fastest-rate-in-a-decade[2] Financial Times, " UK tax system risks losing its luster," 2023, https://www.ft.com/content/07285b62-96d1-4370-be19-f6dc5ca5f928[3] Bloomberg, " uk housing market: a new crisis in the making?," 2023, https://www.bloomberg.com/opinion/articles/2023-02-15/uk-housing-market-a-new-crisis-in-the-making[4] Forbes, " why american millionaires are flocking to the uk," 2022, https://www.forbes.com/sites/aliyaal-ragei/2023/01/28/why-american-millionaires-are-flocking-to-the-uk/[5] The Economist, " uk property tax reforms: the non-dom dilemma," 2023, https://www.economist.com/business/2023/01/31/uk-property-tax-reforms-the-non-dom-dilemma
Disclaimer: The writer is the CEO of Douglas & Gordon, a luxury real estate firm, which may impact personal opinions expressed in this article.
- The steep taxes and regulatory burdens on landlords in the UK are causing a significant exodus of high-net-worth individuals, with more than 11,000 millionaires and 12 billionaires leaving last year.
- Global investors, once drawn to London as a haven for investment, are now fleeing to other countries, leaving a quieter luxury housing market in the city.
- When landlords sell their properties due to high taxes, the housing stock disappears, driving up rent in an already inflated market and leading to poor living conditions for many.
- A shrinking rental supply, combined with stagnant wage growth and London weighting allowances, puts a pinch on those struggling to afford housing, such as baristas, grads, and junior doctors.
- Wealthy individuals contribute significantly to the economy through spending, renovating, and creating jobs, so their departure could lead to a loss of vibrancy and opportunities in London.
- To address this issue, taxation policies must be reconsidered to create an environment that encourages investment, stimulates the market, and leads to a stronger economy for all Londoners.
