The latest research from Enness Global has revealed that high end homeowners across prime central London would need to significantly reduce the size of their properties in order to avoid the newly introduced annual mansion tax on homes valued at £2 million or more, with some requiring their home to be almost halved in size.
Following the Chancellor’s announcement, the new measure will see homeowners charged an annual levy on the portion of their property value above £2 million.
In response, Enness Global analysed all homes currently listed for sale across prime central London at £2 million or more, looking at the average asking price and size of these properties and the corresponding price per square foot. Using this, Enness calculated how much the average mansion would need to shrink in order to fall under the new threshold.
The research shows that the average home currently listed above £2 million in the prime London market is valued at £3.5 million and spans 1,768 square feet. Based on an average price of £1,995 per square foot, a property would need to measure no more than 1,002 square feet in order to avoid the mansion tax. This means that the typical prime central London mansion would need to reduce in size by 43% to come under the £2 million threshold.
Camden sees the most dramatic adjustment, where a homeowner would need to reduce the size of their property by 48.8% in order to bring its value below the mansion tax level.
In the City of London, the required reduction stands at 44.9%, while in Westminster the figure is 44%.
Kensington and Chelsea also face a significant adjustment, with homes needing to shrink by 42.7% to escape the £2 million threshold. Even in Hammersmith and Fulham, where the reduction is lowest among the prime boroughs analysed, a property would still need to lose 33.6% of its size.
Islay Robinson, CEO of Enness Global, commented:
“Of course, we are unlikely to see prime central London’s property landscape carved up like a Christmas turkey simply so homeowners can avoid a mansion tax. However, what these figures highlight is the scale of adjustment a high net worth buyer would theoretically need to make to their lifestyle in order to escape this latest tax grab.
Prime central London remains one of the world’s most desirable and resilient property markets and the reality is that those capable of purchasing at this level are unlikely to be phased by the introduction of a mansion tax.
What it does underline is the growing need for strategic planning around property ownership at the top end of the market, particularly for internationally mobile clients and long term wealth holders.”
