London’s Candy Seeks NYC Real Estate as U.K. Taxes Sting
Nick Candy, the London property developer who helped conceive the most expensive apartment complex in Europe, is in the hunt for New York prime real estate after the U.K. raised taxes on luxury homes.
“New York is definitely catching up,” Candy, 39, said in an interview. “Could it overtake? Yes, if our government continues to make absolutely disgraceful decisions on the real estate market in this country.”
London may lose its appeal for luxury developers because of tax increases and the prospect of further levies, said Candy, who helped create One Hyde Park with his brother, Christian. Prime Minister David Cameron targeted the wealthy to pare a record budget deficit by increasing a transaction tax to 7 percent from 5 percent on homes sold for more than 2 million pounds ($3.2 million).
Luxury properties in both the U.K. capital and New York are selling for record prices. A furnished home in One Hyde Park sold for 7,500 pounds a square foot last year and a penthouse across the street in the Bulgari Hotel and Residences sold for 7,000 pounds a square foot, or about 100 million pounds.
A duplex penthouse under construction on Manhattan’s West 57th Street went under contract for as much as $9,000 a square foot, or more than $90 million, earlier this year. The building, One57, will be the borough’s tallest residential tower.
“There’s a lot of parallels with London,” said Jonathan Miller, president of New York-based appraiser Miller Samuel Inc. “The big thing over the last year and a half is the proliferation of trophy purchases.”
Christian Candy, Nick’s younger brother, bought a penthouse in the Plaza Hotel on New York’s Fifth Avenue for $25.9 million in March. The 6,500-square-foot (604-square-meter) triplex apartment overlooking Central Park was acquired at a 31 percent discount from what its owners initially sought.
The apartment is being remodeled by Nick’s interior-design company and probably will be finished by the end of this month, Nick Candy said in a Sept. 13 interview at the Celtic Manor golf resort in Wales. While he didn’t say whether his brother intends to keep the apartment or sell it, Candy said the property’s near completion has prompted the pair to seek projects in New York.
“We’re about to look at some other deals” in New York, Candy said. “It’s an international city. It’s more entrepreneurial than London.”
“New York was pretty undervalued and is catching up,” Candy said.
New York real estate purchases are taxed at 0.4 percent, according to the state Department of Taxation and Finance’s website. An additional levy, sometimes referred to as the “mansion tax,” of 1 percent of the sales price applies to residences sold for $1 million or more.
New York City imposes an additional 1 percent tax for residential sales of less than $500,000 and 1.425 percent for pricier transactions, said Owen Stone, spokesman for the Department of Finance. There also are levies tied to mortgages.
The U.K. stamp-duty increase hasn’t yet deterred luxury buyers. Sales of homes valued at 2 million pounds more than doubled in May from a year earlier, according to the most recent data available from the Land Registry. Homes valued at 10 million pounds or more rose 2.9 percent in price in the three months after the stamp duty rose in March, Knight Frank LLP estimates.
U.K. luxury homes are gaining in value because of a scarcity of prime real estate for sale, particularly in London. That’s led to record prices paid for homes in the city’s Mayfair, Kensington and Knightsbridge neighborhoods. Home prices in London’s most expensive areas have increased 49 percent since a March 2009 low point, according to London-based Knight Frank.
Inventory in New York’s luxury market also is falling, according to Miller.
“The properties that purchasers are going for at the high- end are scarce, he said.
On top of increasing the stamp duty, the U.K. government introduced a 15 percent tax on homes brought by companies based in offshore tax havens like the Cayman Islands where affluent purchasers can also gain the benefit of anonymity.
‘‘Now they have to hide their identity at a cost of 15 percent, so maybe it’s better for them to invest in New York where they can easily hide their costs or their identity,’’ Candy said.
The U.K. government also is considering an annual charge of 140,000 pounds on properties owned by offshore companies and valued at more than 20 million pounds, according to the Treasury. It may also extend capital gains tax on the sale of luxury homes by nonresidents who aren’t naturalized.
Luxury-home buyers in New York ‘‘haven’t got that 15 percent upfront,” Candy said. “They may have a tax later, but not 15 percent on day one.”
A One Hyde Park apartment is for sale with an asking price of 65 million pounds. The building was developed by a venture between Christian Candy’s CPC Group and Qatar Prime Minister Sheikh Hamad Bin Jasim Bin Jaber al Thani’s closely held Waterknights. More than 1.5 billion pounds of home sales have been completed there, according to developer Project Grande (Guernsey) Ltd.
Before in the global financial crisis, luxury real estate developers in London saw “10 percent a year guaranteed growth,” Candy said.
“They were allowing for that in their business models to get where they needed to be on a return-on-investment basis and to rationalize why they would pay that price in the first place,” he said. “That doesn’t exist today.”
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