Experts are warning that tens of thousands of potential sales will not go ahead in 2010 thanks to the end of the stamp duty holiday on January 01 it increases from £125,000 to its old level of £125,000 and the tax on bank bonuses will diminish buying power in the prime central London real estate market.
‘Buyers form the financial and business services sector account for 50% of demand in the prime central London market and the return of bonus buyers was expected to play an important role in sustaining current levels of pricing through the spring and summer markets of 2010 when we anticipate more stock coming to the market,’ explained Lucian Cook, director of Savills residential research.
‘There has been so much uncertainty over how bonuses might be paid this year and while we've seen growing numbers of bankers out window shopping we haven't seen any evidence that they've been pre-spending their bonuses,’ he said.
Savills had forecast that a third of the expected £6 billion financial sector bonus payout could be spent on property.
‘These measures will inevitably reduce that figure as bonus buyers from the banking sector at least either put off their decision to buy or see the purchasing power of their bonus significantly diminished,’ added Cook.
However there will still be money coming into the market from other financial services sectors.
Others agree. ‘The prime London market has been particularly buoyant recently in anticipation of a return of big bonuses and so this attack on high value bonuses has the potential to hit that sector of the market hard, at least in the short term,’ said Ray Boulger of mortgage broker John Charcol.
Some think it might even tempt bankers to move abroad. ‘Even before the pre-budget report we were taking calls from highly skilled individuals looking to move to other financial centres such as Zurich, Singapore and Frankfurt,’ said Jill Storey, tax partner at accountant KPMG.
‘The large number of bankers who’ve been considering abandoning ship may now be persuaded that it is time to move offshore and we could see a large number of country houses come to market out of season,’ said David Adams, head of residential at Chesterton Humberts.
According to Liam Bailey, head of residential research at Knight Frank it will have a long term effect.
‘The real impact will be felt in the longer term. There is a risk in terms of the impact on the economy and the housing market of another seemingly ad hoc, politically driven tax change.
We have seen several in the past few years and cumulatively they risk weakening the attractiveness of the UK and London as places to do business,’ he explained.
Simon Rubinsohn of the Royal Institution of Chartered Surveyors said it expects a drop in activity in 2010 following the end of the stamp duty holiday.
Robert Sinclair, director of the Association of Mortgage Intermediaries endorsed this view saying that the housing market, although showing signs of recovery, needed a further stimulus and that the Stamp Duty starting point should have remained at £175,000 while The Council of Mortgage lenders said it was disappointed.
Consultants Knight Frank said it calculates that 25,000 house purchases in 2010 will be delayed or postponed as a direct result.
