Sales and receipts from stamp duty fall considerably year on year
Property sales in England, Wales and Northern Ireland have fell by 4% in the third quarter of 2018 compared with the same quarter in 2017 and are down 8.7% compared with three years ago.
A new analysis of quarterly stamp duty figures from HMRC by LCP also shows that receipts from the tax are down 8.2% on the third quarter of 2017 and now stand at £2,392 million, a fall of £213 million.
It points out that this is the third consecutive quarterly fall with a combined total of £685 million in lost revenue compared with the first three quarters of 2017.
‘The fall in transactions reported by HMRC’s recent statistics is undoubtedly due to investors withdrawing from the market until they can see some light at the end of the Brexit tunnel,’ said Naomi Heaton, LCP chief executive officer.
‘The toxic political climate and stagnating prices have brought ever growing uncertainty to the residential market following several years of increased taxation. Receipts have followed suit with transactions and there have been falls across the board,’ she added.
The main rate of stamp duty, which excludes the 3% higher rate for second homes, has seen a fall of 7.1% while the higher rate receipts recorded the largest drop, falling 12.7%. The analysis says that even if the amount of tax claimed under first time buyers’ relief, which the Exchequer would see as a tax ‘giveaway’, was added back, the total take would still be down by almost 3%.
Heaton pointed out that with the housing market in such a parlous state, it would seem somewhat imprudent for a sitting Chancellor to raise further taxes on the residential sector. But this is exactly what Phillip Hammond has done, proposing an additional levy of 1% on non-resident purchases in the most recent Budget.
Heaton believes that is should not be underestimated how important revenues from overseas buyers are in London markets and for new build developments in the UK’s most prominent cities, where price points are unaffordable for the domestic market, these investors represent a significant proportion of buyers.
Indeed, LCP’s November residential index recorded a 21% premium in Greater London for new build versus older stock. It said that with developers currently struggling and scaling back projects, this new tax will not be welcome, particularly as the higher end stock enables these developers to build out the much needed affordable end of the spectrum.
Heaton explained that it is also unlikely to have a material impact on tax revenues, given the recent trend of falling receipts alongside steadily rising tax rates. ‘HMRC stamp duty statistics do not paint a rosy picture of the UK housing market, with neither the buyer nor the Exchequer winning out,’ she said.
‘Until the Government has a clear road map for Brexit we are unlikely to see increasing transactions and therefore increased revenues. Whilst it is highly unlikely that the Government will repeal any of their recent tax increases it certainly does not seem to be the time to implement more,’ she concluded.