Stamp duty rise hits London home prices with fastest fall since the crash
Slump: London's house prices have fallen by 10 per cent (Picture: Daniel Berehulak/Getty)
Jonathan Prynn, Consumer Business Editor Joanna Bourke
Property prices in central London are falling faster than at any time since the financial crash, with family homes down as much as 10 per cent.
Agents warn that the market has been hit by the extra stamp duty bills foisted on buyers of properties worth more than £1 million by George Osborne in last December’s Autumn Statement.
The purchaser of a £2 million London home now has to find £153,750 — enough to buy a house outright in many parts of the UK — to cover the stamp duty, against £100,000 before the shake-up.
George Frank, sales director at central London agents Douglas & Gordon, said the combination of higher stamp duty and a sales slowdown that began with nervousness in the run-up to the General Election “has caused larger family houses to stall, with prices down circa 10 per cent year on year”.
Figures out today from the Haart estate agency show that prices across London as a whole dipped 2.3 per cent in June, although they are still up 5.4 per cent year on year. They also showed that the number of first-time buyers registering with its branches is down year on year by 17 per cent.
Nicholas Leeming, chairman of agents Jackson-Stops & Staff, said: “The wider UK residential property markets are reasonably buoyant now that we have the General Election behind us and the uncertainties that any potential political changes bring.
“However, the revision to stamp duty rates late last year has contributed to widespread stagnation of higher valued markets in 2015, both in London and the country, where many properties are finding it hard to attract buyers.”
Official government housing market data next month is expected to show the first year-on-year falls in London since 2012. Some sellers have been forced into huge asking price cuts in a bid to drum up interest in exclusive neighbourhoods where gazumping and sealed bids were the norm a year ago.
A six-bedroom house on The Bishops Avenue in East Finchley on the market at £9.9 million in March last year is now being advertised at £6.45 million.
Agents had hoped that the resounding defeat of Ed Miliband’s Labour Party in the May poll, which removed the threat of a mansion tax, would set the market bounding forward.
But the surge has not materialised, with many buyers shifting into renting to avoid a huge stamp duty bill.
Agent Knight Frank said it had seen a 182 per cent surge in the numbers of applicants willing to pay £5,000 a week for luxury “super rentals” in the three months to June 30. Tom Smith, its head of super prime lettings, said: “Tenants can now find properties available to rent where the product quality mirrors their uncompromising expectations.”
The demand is so strong that the firm has launched a new London high-end rental team.
Figures released this week by HMRC show that revenue from stamp duty — once one of the Treasury’s fastest-growing fiscal “cash cows” — are now in rapid decline, partly due to the slump in sales at the top end of the market.
In the first six months of the year the Government raised £4.45 billion from stamp duty, down £1.58 billion, or 26 per cent, compared with the second half of 2014. The fall will alarm Treasury number crunchers who have been relying on fast-rising stamp duty receipts to help close the deficit.
Trevor Abrahmsohn, head of the Glentree Estates agency in north London, described the new stamp duty regime as “a permanent blight on the market above £1.5 million”.
Paula Higgins, co-founder of the Homeowners Alliance, said: “This is a tax on aspiration and on London.”
Latest figures from the Land Registry show house sales were 20 per cent down in March compared with a year previously, with deals involving properties worth more than £2 million down by 30 per cent from 175 to 122.
Although the market reverse has so far mainly affected central London properties in the £1.5 million to £5 million bracket, there are concerns that the ripples will start to be felt elsewhere in the capital, even though stamp duty bills are now lower on transactions below £937,000.
The Chancellor’s reforms abolished the old “slab sided” stamp duty system and introduced a new system of progressive bands.
Buyers now pay nothing on the first £125,000 of a property’s value, two per cent on the portion between £125,000 and £250,000, five per cent from £250,000 to £925,000, 10 per cent between £925,000 and £1.5 million and 12 per cent above that.