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W14 | Friday - Monday, December 23 - 26, 2016
THE WALL STREET JOURNAL.
MANSION
ALICE WHITBY FOR THE WALL STREET JOURNAL (8)
A NEW LEASE ON LUXE LONDON
BELSIZE PARK Emily Preheim DuPre in her home, top, which she rents for $8,000 a month while continuing to look for a property to buy. Dr. DuPre, an American expat, lives in the 2,000-square-foot, three-bedroom apartment in Belsize Park, above left and center, with her husband and two daughters. Above right, some of the restaurants that fill their lively neighborhood. Continued from page W9 rise. Falling home prices in the past year have prompted many would-be buyers to postpone purchases in hopes of getting a better deal. And some are reluctant to commit to a purchase in the face of high real-estate taxes and uncertainty following Britain’s vote to exit from the European Union. Meanwhile, homeowners in posh neighborhoods such as Chelsea and Mayfair also are taking a wait-andsee approach, in many cases deciding to rent out their homes rather than sell in a softening market. Estate agents Knight Frank said rental agreements were up 23% in the three months to November, compared with same period in 2015, though the firm declined to disclose the number of leases it brokered. With the number of homes available outstripping demand, it is “a tenant’s market,” says Tom Bill, head of residential research at Knight Frank. Oscar Creixell visited between 30 and 40 homes around South Kensington and Chelsea in his search for a two- or three-bedroom luxury apartment. Working with a $1.8 million budget, the 29-year-old director at a recycling company in the U.K., says he made two offers. Both fell through after the Brexit vote. People “were saying they were very serious about selling, but what I found, really, is that a lot of the people who owned these places are actually wealthy enough that they can afford not to sell” until the market is more stable, says Mr. Creixell, a Barcelona native. Mr. Creixell has decided to rent a three-story house in South Kensington instead. He pays $3,100 a month. He says he has soured on the London market and plans to continue renting for the foreseeable future. Recent revisions to the U.K.’s transaction tax, or stamp duty, have posed a particular problem for expats looking to buy in London. In late 2014, the cost of buying homes valued at more than £937,000 went up on a sliding scale, rising to a 12% tax on the portion of a sale over £1.5 million. In April, an additional 3% was tacked on to the sale price of homes for foreign buyers or for those renting out their properties. For people posted to London for work—who might be staying only a few years—these changes mean that buying a home now makes less financial sense, says Jo Eccles,
managing director at broker Sourcing Property. Many of her clients have chosen to rent instead. “If you’re only here for three years, you won’t have enough capital appreciation to wipe out stamp duty,” she says. Dr. DuPre has calculated that stamp duty on the kind of property her family would want to purchase would be comparable to paying three years of rent—on top of the price of the property, she says. The couple continues to scour real-estate listings in London. But while they wait, they have made some additions to their rental property to make it feel more like a permanent home, including setting up a trampoline and swing set in the backyard for their daughters. Interior designers in London say such moves to customize rental homes are increasingly common among London residents. Annabella Nassetti, who creates modern interiors with an emphasis on maximizing space in city apartments, says high-end renters are spending more on rugs, tapestries and art for properties they can’t change structurally because of their leases. And renting is increasingly looking like a good deal. An influx of properties on the market has helped push rents down about 5% since their most recent peak in mid-2015, says Mr. Bill of Knight Frank. The increase in inventory is the result of the falling prices of homes in central London—6% on average in 2016, according to Knight Frank—which has encouraged homeowners to wait for a market rebound before listing their properties. In May, Lennox Investment Management, which runs a fund that invests in prime central London real estate, was preparing to sell two houses and two condominiums valued together at about $74 million. The fund had an eight-year lifespan due to end in June. But given the weak sales market, “our investors said if you think you can rent these out, great, we’d rather do that,” says Rupert Bradstock, investment partner at Lennox. Mr. Bradstock says that since putting the homes on the rental market in September, all have been leased for as much as $16,700 a week. “If you don’t believe the market is roaring ahead, which it’s not,” he says, “then it can make a lot of financial sense to rent.”
NO DEAL Clockwise from above: Oscar Creixell, 29, a native of Barcelona, decided to rent in South Kensington after offers to buy fell through; the dining area of his home; a local street; an ice rink and the Natural History Museum.