One thing has, after all, led to another. Against many years of better judgement, Mrs FvL and I have taken the plunge and bought a second home on the UK’s south coast. Our Coastal Folly.
This blog post tells the story of how I’ve paid for the Coastal Folly. I’ve surprised even myself with how it’s happened.
The Coastal Folly is expensive. Well over £2m of property. It is not a little 2 bed cottage 20 minutes drive from the sea. It is a premium piece of real estate, with uninterruptible sea views.
As a second home, it attracts additional stamp duty (the property transaction tax payable in cash to the government at completion) – for this value of property my stamp duty is well over 10%. A lot of people I know froth at the mouth at this level of stamp duty. Not me. My portfolio has benefited from low investment taxes. And most of what I spend my money on incurs 20% VAT. So having to shell out 12-13% purchase tax on a discretionary purchase, using money that has been taxed at 0% or 20%, doesn’t feel unreasonable at all to me.
I spent a fair bit of the summer thinking about second homes. At times it seemed as if every second person I knew had a second home – with plenty bought since lockdown started, as a getaway from urban London. They are (see map below) for the most part 2-3 hours drive form London; the Cotswolds just beyond Oxford and the Poole/Bournemouth coast in the southwest are particularly popular among my London circle.
James Max starts with my position – that 2nd homes are fundamentally a hassle. Complexity. Things that can go wrong. Costs. An asset that is more of a liability. Like James, I don’t see myself letting a home out, via AirBNB, VRBO or the rest – so I wouldn’t see any income to offset the additional council taxes, utility bills, and occasional maintenance to deal with. Builders to find, gardeners and cleaners required.
I feel as if there is a crescendo of doom-mongering about London.
Most notable for me was a piece a week or two ago by Simon Kuper in the FT. Kuper argues that three things threaten to diminish London, risking it following Vienna and Constantinople into decline:
Covid-19. Covid means lockdown. And lockdown means working from home. Kuper argues that “though working from home threatens all cities, it disproportionately threatens London”.
Brexit. The “UK-EU trade deal does little for London”. In the first week of the Brexit new world, apparently €6bn a day of stock trading moved from the UK into the eurozone, which alone could be worth has much as £20bn a year of lost revenues (a quarter of the UK’s services trade surplus). I hear rumours that Goldman Sachs is yet to move 2000 roles from the UK into the EU. That is a lot of tax that won’t be paid to HMRC, and fancy dinners no longer being enjoyed in the West End.
The role of English. Kuper argues that “a decade ago there was no obvious European substitute for London. Now, cities like Berlin, Copenhagen, Amsterdam have become quasi-bilingual business hubs.”
Kuper cites house price data as suggesting that “local rivals are eating into London’s supremacy”: London’s prices have fallen (in international terms) since 2016, whereas Parisian prices are up about 25%. More money is going into Paris’ office space than London’s in 2019, the year before the pandemic.