London has seen an increase in high-end home buyers turning to mortgages due to the rising tax burden.
According to a report from U.K. real estate company Hamptons International released last week, 74% of homes priced at least£1 million (US$1.4 million) in London were bought with a mortgage in the three months through July 2017, jumping from 65% a year earlier. The figure was as low as 31% during the financial crisis in 2009.
The findings coincide with the release of another London market report earlier last week in which it detailed the decline of the all-cash buyer in the city.
"Between 2009 and 2015, the large majority of property buyers were cash buyers, although currently not so much",Roger Collings, branch manager at real estate company RE/MAX in London said in the September house price report by property website Rightmove.
More:Eisenhower’s London Headquarters Become Luxury Residences
"In 2009 until 2015, the central London market was inundated with investors looking to purchase property as a way to invest their money in a safe financial environment", Mr. Collings said in the Rightmove report. "However, since the introduction of the 3% surcharge on stamp duty paid by investors, along with the uncertainty as to how Brexit will impact London’s property market, investors have been standing on the side-lines."
Stamp duty is the levy buyers pay to the U.K. government on every property transaction, which rises by staged "bands" according to the value of the property you buy.
According to Her Majesty's Revenue and Customs, homeowners in the U.K. would pay a levy of £3,750 (US$5,054) on a £1 million house for single-property ownership. That jumps to £153,750 (US$207,194) for a £2 million purchase.
In 2015, the Chancellor of the Exchequer George Osborne announced a 3% increase in stamp duty for buy-to-let investors or second-home buyers on any properties worth over £40,000 (US$53,838). The higher tax has been cooling down the property market in the U.K. capital. While monthly increases are normally seen in autumn, London’s asking prices suffered an unusual monthly fall of 2.9% or £18,358 (US$24,754) in September, caused by the continued readjustment of the prime London market, according to Rightmove.
More:London’s New Apartments Mix Old and New
London is not alone in the rising proportion of buyers using mortgages to acquire high-priced homes. The percentage has grown in every U.K. region in the period through July, according to Hamptons International. The East of England jumped 9% while Wales registered a 1% rise in mortgage buyers.