Buying a property costs more than just the price
A buyer must include any transaction costs, like stamp duty and other ongoing taxes and fees. These costs vary across countries and sometimes within countries. But, while the purchase and living costs of high value properties in London and New York are broadly similar, these costs are dwarfed by those in Hong Kong.
When buying a property a buyer must factor in transaction costs. For example, in the UK, a buyer is subject to Stamp Duty Land Tax, which increases in line with purchase price. However, aside from a nominal annual council tax, there are no other annual taxes payable in the UK. In contrast, home owners in both Hong Kong and New York are subject to various annual taxes; Hong Kong has three different types of annual tax on all properties.
When you compare the fiscal regime across London, New York and Hong Kong it shows that for a £2 million property, London’s taxation is the most favourable. Over five years, the owner of a £2m London property would pay around £160,000 on taxation. This compares with just under £190,000 in New York. In Hong Kong the five years cost would be nearer £450,000.
However, on a higher value property London’s level of taxation edges slightly above New York; for a £5 million property in London, transaction and five year living costs add around 10% to the price, In Hong Kong its taxes add a further 23% to the purchase price. This compares with 9% in New York.
If a London property is bought within a corporate structure then there are higher and additional taxes to pay. Stamp Duty increases to 15% and there is an Annual Tax on Enveloped Dwellings (ATED) applicable. For example, a £5 million property would attract a Stamp Duty charge of £750,000 with an ATED of £54,450. Including Council Tax this increases the total charge over five years to £1,029,700. However, at an additional 20.5% over purchase price, this still remains more favourable than the Hong Kong tax regime.