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London’s super-rich turn to renting

The UK's "generation rent" may be priced out of home ownership, but renting is also on the rise among a very different group: London's super-rich.

After stamp duty increased on expensive homes and prices began falling in the capital's wealthiest areas, potential buyers of homes worth more than £10m are increasingly opting to become tenants instead.

Agents said uncertainty over the UK's referendum on EU membership and concerns about the use of offshore companies for property purchases following the Panama Papers leak may add to the shift.

The number of lettings deals on homes worth more than £10m each year has more than doubled since 2011, and rose almost a third in the year to March 2016 from the previous year, according to figures from Knight Frank, an estate agency.

At the same time, sales of such homes fell to 138 in the past year from a peak of 206 a year earlier, a drop of 33 per cent.

"No one is predicting that homes at the top end will be worth 10 per cent more in the near future and most people think they will be worth less," said Henry Pryor, a buying agent. "It is much easier to make a decision to rent and make sure that if you do buy it's something you really want."

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Tom Bill, head of London residential research at Knight Frank, said stamp duty on a £15m home now totalled £1.7m — equivalent to three years' rent. The duty is even higher if the buyer already owns another home, following reforms brought in this month.

The length of "super prime" rentals has also been increasing, reaching an average of two years after moving between 12 and 17 months for the previous five years.

Leases costing £5,000 a week or more are clustered around areas such as South Kensington, Knightsbridge, Mayfair, Regent's Park and Holland Park. Yields for landlords of such homes can top 4 per cent, compared with an average 2.9 per cent in London, because properties in the top bracket are scarce, Knight Frank said.

Mr Pryor said the Panama Papers leak, which revealed the owners of a series of offshore companies used to buy London properties, had highlighted that "no one can [buy] quietly". He added: "There are some people who will be put off by that, and they should be."

Charles McDowell, a high-end estate agent, said he had received several rental offers on properties that had been marketed for sale.

However, Tom Smith, head of super-prime lettings at Knight Frank, warned potential landlords of such homes to expect demanding tenants. "A common mistake is to think the requirements of a tenant are less stringent than they are if they were buying the house," he said.

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