LONDON
Both Hong Kong and New York have lower purchase
costs in percentage terms, of 5.3% and 1.1% respectively,
due primarily to lower stamp duty. A permanent Hong
Kong resident pays a 4.25% rate of stamp duty on
properties worth HK$21.73 million (£1.67 million)
and above, while in New York the equivalent transfer
tax is paid by the seller rather than the buyer. This is
despite the fact that, since 1989, buyers pay a “mansion
tax” on the purchase of a property, which is 1% for
homes of $1 million or higher.
Comparison with Hong Kong
Nevertheless, London starts to look more attractive
when you consider that prime house prices in Hong
Kong are far higher – rising 294% between 2003 and
2013, according to provisional figures by the Hong
Kong rating and valuation department.
This puts the price of a typical two-bedroom
apartment in an upmarket area on Hong Kong
Island, such as Jardine’s Lookout, the Peak or the
Mid-Levels, at HK$35m (£2.69m). This takes
the total purchase cost for residents to HK$36.86
million after taxes. In addition, as part of cooling
measures introduced to stall an overheating market,
non-residents now pay a far higher stamp duty rate,
set at 8.5% for the top band of property.
Since 2012, non-permanent residents have also
had to pay an additional buyer’s stamp duty (BSD)
charged at 15% of the property’s market value. It
means a non-resident purchasing a HK$35 million
flat could be looking at a stamp duty and BSD total
of HK$8.22 million, equating to a staggering 23.5%
of the purchase price.
Comparison with New York
By contrast, New York has much lower prices across
the prime market and far lower buying taxes, making
it an attractive proposition for those who want to buy
now. The Case-Shiller home price index puts New York
prices in January 2014 at 20% below their 2006 peak, a
46
Offshore Handbook 2014
clear sign that the US housing market is yet to recover
from the continued impact of the credit crunch.
Even in trendy and elite pockets of downtown
Manhattan like Chelsea, where prices are highest
according to the Corcoran Report (a regularly
updated report produced by the broker the Corcoran
Group) the average price of a two-bedroom condo is
$2.27 million (£1.36 million), still much less than in
prime London or Hong Kong.
However, the catch for investors is that New
York has the highest taxes for the vendor of the
three cities. Transfer tax and agents’ fees add up to
about 6%, compared with agents’ fees of about 1%
in London and Hong Kong. New York also has the
highest ownership costs due to its monthly real estate
tax. A two-bedroom condo worth £1.36 million in
downtown Manhattan would cost the owner £4,436
a year, or 0.3% of the property’s value, according to
Middleton Advisors, compared with £2,134 (0.13%)
of annual council tax for the comparable property in
prime London, and £2,071 (0.08%) for a similar flat in
upmarket Hong Kong.
London still tops
Despite the difficulties of the past few years, London
still manages to come out on top in many ways, with
neither the highest prices nor the highest taxes.
As London Major, Borris Johnson recently told
international investors at MIPIM in Cannes, it
would be wrong to be complacent, but London has
fundamental advantages from its time zone to its native
language, its young and growing population to safe,
improving transport infrastructure.
“When you’re an international investor, and
wondering where to put your money, you know that
London is a banker. You know it’s going to be safe,”
Borris said.
RESOURCES
Smuts & Taylor
www.reimag.co.za