Rich people are fleeing London

[10023]

Originally Posted by montréaliste

There is a lot of damage created by HNWI's who invest in real estate and leave it fallow for long periods. jd3189's opinion is not as radical as some would have it. On the other hand, there are mechanisms in the UK civic governments that allow for incentives that are totally unreal when looking at the broad market valuations.

This article in the Guardian reveals a few interesting points about this;


https://www.theguardian.com/society/...e-end-up-empty

HNWI’s are not buying real estate in London and leaving it fallow. That is a much smaller population of UHNWI’s (Ultra High Net Worth Individuals).

If you’ve got just over $1 million of net assets, you might not be able to afford to buy property in central London.

I’m also sure that there are more than 15.2 million such people worldwide. Perhaps they mean the US?

[Vlajos]

Anyone know the source of the article? I have a feeling it's not reliable.

[10023]

Originally Posted by Vlajos

Anyone know the source of the article? I have a feeling it's not reliable.

It’s Bloomberg click bait written by some borderline intern.

These sub-500 word articles are never “news”. We probably need to tighten up forum standards in that respect. They never provide enough detail on the data or methods for a sceptical review, nor is there adequate context and nuance.

For instance, it mentions “new taxes” in the UK, but doesn’t describe these at all. And I, as a high bracket UK taxpayer, am not aware of what they might be referring to.

Anyway, this is the source it cites - a research firm based in Jo’burg, South Africa:
http://www.newworldwealth.com

[Jonesy55]

Do they mean the restrictions on mortgage interest tax relief for landlords renting out property? I can't think of what other tax changes they might be referring to...

[montréaliste]

Originally Posted by 10023

HNWI’s are not buying real estate in London and leaving it fallow. That is a much smaller population of UHNWI’s (Ultra High Net Worth Individuals).

If you’ve got just over $1 million of net assets, you might not be able to afford to buy property in central London.

I’m also sure that there are more than 15.2 million such people worldwide. Perhaps they mean the US?

Yes, I agree that speculation over a number of years in buying property, paying tax on an unused asset requires important funds. I also find the numbers of HNWI's implausible, at best.

There is also a specious tendency in thinking of financial sector players as the only purveyors or conveyors of wealth. The Financial sector (as opposed to the false claim that it is an industry) amasses and distributes important sums of monetary assets. It does not create wealth without the multilayered complex net of industrial and commercial players.

A million dollars in the industrialized world doesn't get you much anymore, especially in terms of real estate. There are many times more individual owners of property and businesses with assets and equity above a million than what is reported in said article.

[10023]

Originally Posted by Jonesy55

Do they mean the restrictions on mortgage interest tax relief for landlords renting out property? I can't think of what other tax changes they might be referring to...

That’s pretty old news, and in any event wouldn’t cause anyone to move out of London. It does dissuade some people from becoming a landlord, but that’s pretty much the opposite thing, isn’t it?

[YSL]

Originally Posted by 10023

Rich people leaving cities is what destroyed most American cities after WW2. It’s why most American cities are not the vibrant places they once were.

But I don’t see this being a worthwhile debate, so I will leave it at that.

I don't know about that but rich people did not leave New York or San Francisco in the 1970s. Middle class people left. Rich stayed put. But then again, 'HNWI' isn't that rich, so perhaps most "HNWI" people probably left. UHNWI people are the ones who stayed in the city.

[YSL]

Originally Posted by Vlajos

Anyone know the source of the article? I have a feeling it's not reliable.

Why don't you think it's reliable? There have been lots of high profile Londoners who have left very recently, so it's probably not that far off.

[10023]

Originally Posted by YSL

Why don't you think it's reliable? There have been lots of high profile Londoners who have left very recently, so it's probably not that far off.

Like whom?

[Docere]

Originally Posted by YSL

I don't know about that but rich people did not leave New York or San Francisco in the 1970s.

Yeah, I suspect the rich "exodus" from NYC was well over before the 1970s.

[nito]

I’m a bit confused as to the new taxes that they are referring to. There was a change to stamp duty (the tax payable on property transactions) on high-end property, but that was back in 2014. Another change to stamp duty came in April 2016, but that was aimed at second home purchases, not primary residences. Super-prime prices in London declined last year, which is of little surprise considering the stratospheric levels they had reached, although super-prime renting ($7,000+/week) has subsequently took off. Talking about super-prime renting reminds me of this comical quote from the Financial Times:

Originally Posted by Financial Times

“We had a student who was about 20 paying £3,000 [$4,200] a week for a one-bedroom apartment in One Hyde Park,” says Kruczko.

Source: https://www.ft.com/content/26b11d26-...6-21cc87a2edde

Originally Posted by isaidso

So rich Londoners are leaving to join middle class Londoners who've been leaving for a long time. Is London heading back to the days when the population barely budged or are people still flooding in from eastern Europe, Asia, and Africa?

London’s long-term negative internal migration rate (93,302 in 2016) is driven not by socio-economic standing, but young families of a variety of backgrounds relocating outside of London to the East and South East where property is more affordable and there are the transport connections to commute into the city.

That loss though is more than offset by the positive international migration rate of 126,079 and natural change of 80,136.


Chart based on data produced by the Office for National Statistics, https://www.ons.gov.uk/peoplepopulat...imates/mid2016

[Jonesy55]

Originally Posted by 10023

That’s pretty old news, and in any event wouldn’t cause anyone to move out of London. It does dissuade some people from becoming a landlord, but that’s pretty much the opposite thing, isn’t it?

Yeah, that's what I was thinking, it might put off people wanting to invest in second or third properties in London for rental purposes but I can't see how it would make a difference for anybody living there.

Then there's the SDLT reform that Nito mentioned but again I can't see why that would have an impact either. Can't think of any other big tax changes that would cause people to leave. The main reason I guess would be financial services workers being relocated to Frankfurt or Paris or Amsterdam because of Brexit concerns.

[10023]

^ Yes, Brexit is relevant, but the “tax changes” seems like something they’ve just made up.

Let’s keep in mind that the South African firm that produced this report is probably about 3 guys with an office in Jo’burg.

[jd3189]

Originally Posted by 10023

Rich people leaving cities is what destroyed most American cities after WW2. It’s why most American cities are not the vibrant places they once were.

But I don’t see this being a worthwhile debate, so I will leave it at that.

That is true, but that was also a result of policies and beliefs that prevented the people left in US cities at that time from growing their own wealth and controlling the communities. Kinda connects back to the white flight thread.


I don't think London will face the same problems. The US problem was based on old racist beliefs and policies. London, as well as New York, Los Angeles, Toronto, and other cities today, is very cosmopolitan where groups from all income levels, races, nationalities, etc can possibly live in harmony.


I know you mentioned before that rich people are the most important group in a city. I agree that they are important, but they aren't the only ones that make up a city. If a city is only filled with rich folks, it's basically a gated community that pretty much is the same no matter where you go in the world because they are all part of the same elite group. Cities are interesting because of the diversity.

[Vlajos]

Originally Posted by 10023

It’s Bloomberg click bait written by some borderline intern.

These sub-500 word articles are never “news”. We probably need to tighten up forum standards in that respect. They never provide enough detail on the data or methods for a sceptical review, nor is there adequate context and nuance.

For instance, it mentions “new taxes” in the UK, but doesn’t describe these at all. And I, as a high bracket UK taxpayer, am not aware of what they might be referring to.

Anyway, this is the source it cites - a research firm based in Jo’burg, South Africa:
http://www.newworldwealth.com

Yeah, I've seen that S.A. report before. It's sheer nonsense. Not worth the paper it was printed on. They use "news" reports in their "research".

[whatnext]

Seems like London would be well served by some of them leaving.

Buy to leave: profits dwarf 'meaningless' fines for London investors

The gains to London property investors from leaving homes empty has far outstripped the penalties they face doing so, a Guardian investigation has learned.

Owners of homes with a combined value of over £500m in the ultra-rich borough of Kensington and Chelsea were fined a total of just £85,000 for leaving them empty last year, a survey of vacant properties suggests.

The figures can be reported due to the accidental release earlier this year of a confidential database, which for the first time identified hundreds of properties left empty for at least two years, as well as their owners.

The single largest penalty imposed on any of the 89 properties examined for the survey was just £1,426, even though the property – a £9m, six-storey mansion in the Notting Hill area – has increased in value by approximately £1.1m since it was acquired three years ago.

Polly Neate, the chief executive officer of the housing charity Shelter, said the data revealed how the empty homes premium – a penalty measure of an additional 50% council tax for long-term empty properties – was effectively “meaningless”...

https://www.theguardian.com/cities/2...ington-chelsea

[10023]

Originally Posted by whatnext

Seems like London would be well served by some of them leaving.

Buy to leave: profits dwarf 'meaningless' fines for London investors

The gains to London property investors from leaving homes empty has far outstripped the penalties they face doing so, a Guardian investigation has learned.

Owners of homes with a combined value of over £500m in the ultra-rich borough of Kensington and Chelsea were fined a total of just £85,000 for leaving them empty last year, a survey of vacant properties suggests.

The figures can be reported due to the accidental release earlier this year of a confidential database, which for the first time identified hundreds of properties left empty for at least two years, as well as their owners.

The single largest penalty imposed on any of the 89 properties examined for the survey was just £1,426, even though the property – a £9m, six-storey mansion in the Notting Hill area – has increased in value by approximately £1.1m since it was acquired three years ago.

Polly Neate, the chief executive officer of the housing charity Shelter, said the data revealed how the empty homes premium – a penalty measure of an additional 50% council tax for long-term empty properties – was effectively “meaningless”...

https://www.theguardian.com/cities/2...ington-chelsea

But these aren’t the people that the article says are leaving.

If they’re absentee landlords, then they’re not resident here in the first place. They’re also not “HNWIs”, they’re Ultra-HNWIs. People with just over £1 million in net assets can’t afford second homes in London. Those are people with, at the very least, tens of millions (and probably hundreds of millions) of dollars.

Personally I tend to think this is a massively overstated problem anyway. That £9 million mansion is not going to provide housing for the average person, ever. Sure, the fact that it’s kept vacant by a foreign billionaire means that a London banker can’t live in it, and so perhaps they buy a slightly cheaper place, and so on and so on... but you need that domino effect to continue for quite some time before the upper middle class is even affected. An aggregate value of £500 million sounds like a lot, but that’s probably way less than 100 properties in total.