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London’s Super Prime Landlords Benefit From Stamp Duty Hikes and Brexit

Knightsbridge is the No. 1 destination among super-prime renters

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Super-prime lettings transactions increased 16% to 109 in the year to September.

Matthew Lloyd / Getty Images
Super-prime lettings transactions increased 16% to 109 in the year to September.
Matthew Lloyd / Getty Images

While many sellers across London’s most exclusive neighborhoods are struggling to entice buyers to open their wallets against a backdrop of soaring property taxes and Brexit uncertainty, one winner has emerged: London’s super-prime landlords, who charge a whopping £20,000 (US$25,000) a month or more in rent.

Super-prime lettings transactions in central London increased 16% to 109 in the year to September compared to the previous 12 months, according to real estate consultancy Knight Frank, in a report it released Friday.

Many families are opting to rent to avoid hefty tax bills after the U.K. slapped two successive stamp duty hikes on expensive properties. The stamp duty on the purchase of a £15 million property is £1.7 million, the equivalent of three years’ rent.

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Some people are also choosing to rent as they adopt a "wait-and-see mode" to see if house prices will fall further in the these neighborhoods on the back of the uncertainty caused by the British public’s vote in June to leave the European Union. Savills, another real estate consultancy, yesterday predicted that prices in the prime central London market will fall 9% this year.

"Given the higher running costs buyers also face, stamp duty can be a concern unless they plan to be in a property for the long-term", said Tom Smith, head of super-prime lettings at Knight Frank.  "This is particularly the case while uncertainty surrounds the short-term prospects for price growth".

Rental transactions were spread across central London, with a focus on areas including South Kensington, Knightsbridge, Mayfair, Regent’s Park and Holland Park. Knightsbridge, home of the famous Harrods department store, was top of the list for super-prime renters, securing almost a quarter of all contracts signed in the year to September.

This group also prefers houses as opposed to apartments, with the former representing 64% of transactions in the six months to September, a sign of growing demand among families.

"It is also a reflection of the current uncertainty in the sales market," said Mr. Smith. "A growing number of high-specification houses destined for sale are moving across to the lettings market."

This followed a report by Savills, released Thursday, which predicted that growth in rental prices will outpace the sales market over the next five years as first-and second-time buyers struggle to access or trade up in the market.

More:U.K. Home Sales Set to Slide in Wake of Brexit Vote

Average rents are forecast to rise by 19% across the U.K., and by 24.5% in London, where access to home ownership is most difficult, according to Savills.