The changes to the Stamp Duty Land Tax (SDLT) have increased competition for properties priced below £1 million with more buyers choosing to split their purchases, according to an analysis by Black Brick agency.
Camilla Dell, managing partner at the independent property buying agency, explains:
“The SDLT increase at the upper end of the market is pushing buyers into the sub-£1 million bracket, undermining the Chancellor’s goal of helping buyers at the lower end of the market. Prior to the reforms, someone with £2 million to invest would have likely bought a single property. Now, a £2 million property would carry stamp duty of £153,750, while two £1 million properties would be taxed at £43,750 each – encouraging our £2 million buy-to-let investor to buy two £1 million properties and ‘save’ £66,250 in Stamp Duty. Our own data suggests that investors are targeting the lower end – in January to July last year, our average deal value was £3.54m. In the same period this year, that average has fallen to £1.5m.
“The policy has also backfired on its own terms, reducing the tax-take to the Treasury – research firm LonRes calculates that Stamp Duty paid for prime London sales is down 6.4% since the reform was introduced compared with the same period last year. This illustrates what the Conservative party has traditionally argued: if you increase rates of tax, you depress the market and end up with less revenue.”
“We are increasingly of the view that it will now take a major market correction – of perhaps 20% – to bring the Prime Central London market back to life, and we believe that correction is likely to take place over the next six to 12 months. All it will take is a vendor or two to accept an offer at a substantially lower price-per-square-foot, and that will ripple through the market.”
