Stamp duty land tax changes have hit the prime central London so badly that people are putting their next step up the property ladder on hold.
Estate agent Jackson-Stop & Staff said that the changes to stamp duty were a major barrier to prime central Londoners moving home and it is calling for a one third reduction in the tax to get the market moving again.
Toby Whittome, sales director at Jackson-Stops & Staff London, said: “Potential buyers in central London used to approach us about their next home move, driven by factors like a growing family or need for a home with more bedrooms or a bigger garden.
“These are the ‘old reasons’ for moving, from before December 2014. Our purchaser registration numbers are up, but the fluidity of the market has diminished hugely. When buyers are looking at 20% transaction costs including stamp duty, solicitor’s fees and moving costs, the attitude becomes ‘we’re better off staying where we are’.”
Whittome said that in Kensington and Chelsea sales had fallen to around 120 a month, compared with around three times that number in peak 2014. In 2016 Kensington and Chelsea contributed £514 million in residential stamp duty receipts, the highest of any local authority.
In December 2014, the Government scrapped the old slab structure and introduced a new banding system to help benefit anyone purchasing a home priced under £937,500. Those buying a home above this amount now face a bigger tax bill.
You now pay 0% up to £125,000; 2% to £250,000; 5% to £925,000; 10% to £1.5million and 12% above that.
The latest data from UK Finance, formerly the Council of Mortgage Lenders, paints a strong picture of lending in greater London as a whole. Home buyers borrowed £6.1 billion for house purchase, up 11% quarter-on-quarter and 17% year-on-year. They took out 18,000 loans, up 6% compared to the previous quarter and 8% on the second quarter in 2016.
Given the very low transaction numbers in prime central London, these strong levels of activity are almost certainly emanating from the lower to mid-levels of the greater London regional property market.
Nick Leeming, Chairman at Jackson-Stops & Staff, added: “If stamp duty levels weren’t causing so much harm to the million plus market I think we would see the health and fluidity at the lower to middle end of the Greater London market spread to the higher end too.
“One recommendation is a UK wide reduction in stamp duty levels of around a third, which should boost the property market at all levels, particularly at the million pound plus level. It is worth remembering that in central London typical family homes will likely be worth £1 million or more and, with stamp duty levels preventing these homes entering the market, it means that families are unable to move up or down the property ladder when they need to.”
Stamp duty revenues hit record highs
Stamp duty land tax revenues reached an all-time high of £12.8 billion in the 12 months to July, well above the £10.6 billion peak recorded in late 2007.
This is despite the number of residential property transactions in the year to June 2017 being 30% below those recorded in the same period of 2007.
Nationwide said that stamp duty hike of 3% on second homes in April 2016 was the main reason for the rise, along with higher house prices, which are 12% above their 2007 peak.
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