London property market would welcome stamp duty change
Stamp duty change could revive prime property prices by £700,000, helping the top end of the housing market to recover from the current slump which is attributed to the high level of tax and Brexit uncertainty.
Boris Johnson, the favourite candidate to become the next Prime Minister has pledged to abolish the property tax on homes under £500,000 and reverse the rise on prime and super prime homes that was introduced in 2014 by the then Chancellor George Osborne.
New research by prime London property portal Vyomm, has revealed the extent of this initial decision on the market and says that a reversal in stamp duty tax thresholds at the top end could help boost buyer demand and increase high end house prices by as much as £700,000.
Before December 2014 the stamp duty rate for properties between £1 million and £2 million was 5%, rising to 7% from homes sold for £2 million or more. This was increased to 10% on homes from £925,000 to £1.5 million and 12% over £1.5 million.
As a result the average sold price for homes above £1.5 million in London fell by 3.41% or £101,410 in a year and for properties above £10 million it fell by 4.66% or £738,653 over the same period.
But it wasn’t just London that was impacted, a similar decline was seen across the whole of England and Wales, with the average sold price above £1.5 million down 3.72% and falling 4.15% above £10 million.
The analysis says that in London, a stamp duty reprieve for the top end of the market could see a 3.41% or £102,911 increase on the current average house price of £3 million and in the £10 million plus bracket the current average sold price of £16.8 million could rise to £17.6 million.
According to Utsav Goenka, chief executive officer of Vyomm, the prime and super prime markets have remained a very attractive investment for those with the finance to buy but such a drastic change to stamp duty in 2014 was going to have a detrimental impact on buyer sentiment due to the far greater financial cost of buying.
‘On a property worth ten million pounds we’re talking stamp duty in excess of one million and for those looking to buy as an investment, the additional 3% stamp duty charge pushes this cost to over four million pounds,’ he said.
‘Although the market has adjusted and price growth has stabilised since these changes and the resulting price decline, there is currently an air of hesitation across all levels of the market due to the political landscape,’ he explained.
‘However, a reversal of these stamp duty changes could provide the adrenaline shot that is needed to entice more buyers back to the prime and super prime markets and this will see prices increase notably when it happens,’ he added.
Camilla Dell, managing partner at London buying agent Black Brick, also believes a change would benefit the market and points to official figures showing that stamp duty receipts in England and Northern Ireland fell by 19% in the first quarter of 2019 compared with the same period in 2018.
‘We would welcome a review of current property taxation, particularly the 3% surcharge and proposed 1% additional charge on foreign buyers, which has had the effect of pouring glue into the market and resulting in a dramatic fall in the number of transactions happening on an annual basis,’ she said.
‘Furthermore, a move to cut stamp duty on homes below £500,000 would clearly benefit the first time buyer market. In our opinion, this should only apply to first time buyers and not investors. However, the market needs to treat promises made by Boris Johnson as he seeks election, with real caution,’ she added.