Surge in the number of £1 million homes in the UK

Surge in the number of £1 million homes in the UK

Surge in the number of £1 million homes in the UK

Despite the fact that the UK is in the midst of a major austerity programme by the government it seems there is no limit to how far luxury house prices will move in the short to medium term. It was revealed this week that there are now more than 427,000 properties in the UK valued at in excess of £1 million. Indeed experts believe that 2014 will see the number of £1 million plus properties reach a staggering 500,000.

The figure today is around 50% higher than the number of £1 million properties in November 2007 just before the U.S.-led mortgage crisis which brought the worldwide real estate market crashing down. So, how can UK luxury house prices move so strongly when the economy has not yet even matched its previous high from November 2007?

Limited availability and growing demand

As we have covered time and time again, there is limited availability of luxury properties in the UK and growing demand. Indeed the London market, which is the centre of the UK luxury real estate sector, has attracted major demand from overseas investors who see London as something of a safe haven. Indeed such is the overseas demand that the UK government is actively looking to introduce a specific tax which would level the playing field for domestic and overseas investors. At this moment in time overseas investors have a definite advantage over their UK counterparts.

Quote from : “Lenders growing concerned about funding luxury developments in London

The introduction of a specific overseas property tax may have a short term impact upon demand but the limited availability of property will continue to worsen.

Would higher base rates help?

Whether UK base rates remain at 0.5% or move back towards the traditional 4% will have limited impact upon those at the luxury end of the real estate market. Many of those actively pursuing the London luxury property market are extremely wealthy and unlikely to take out major finance to acquire much sought after prime property. So, in some ways the Bank of England and the UK government have their hands tied and perhaps the blunt instrument of new taxes is all that is left?

Is it right to tax the rich?

This is an issue which is very political and one which attracts very different opinions across the UK and indeed across the world. Those who have acquired wealth and built up riches will at some stage have taken significant risks so why should they be taxed at a later date because they have been successful?

On the other hand, the UK real estate market is dominated by extremely wealthy individuals and companies who are pushing the price of luxury property and dragging the price of traditional property out of the reach of many. Even though general opinion in years gone by has been that taxing the rich would impact upon investment in the UK we may now be nearing a situation whereby some kind of control is required. Whether it will have a long-term impact upon the cost of luxury property across London is debatable but the ongoing headline of ever-increasing property prices is not helping the general public’s opinion of the coalition government.


While in many ways it could be counter-productive in the short to medium term to attempt to “tax the rich” we are certainly moving towards a very difficult situation for the London prime property market. Overseas investors are running a mock across the sector and this is in many cases dragging upwards the price of more traditional property markets across the country. Will the government step in and introduce some kind of tax to reduce the benefits afforded to overseas investors? Or is this something of a backward step and something which could impact future investment in the UK economy?

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