The Government is facing more calls to address Stamp Duty issues on both prime and additional properties ahead of the Autumn Statement next week.
Nick Davies, head of residential development at Stirling Ackroyd, says Stamp Duty must be cut to get the property market moving as buyers steer clear due to the rising costs.
Research by the agent shows house prices for the top 25% of the London market fell 5.4% between the second quarter of 2015 and the second quarter of 2016 – after former Chancellor George Osborne reformed Stamp Duty – as buyers face paying 10% on portions above £1m, 12% on those above £1.5m plus an additional 3% if purchasing a second home.
A property in the top band priced at £2m would have cost a buyer £100,000 in Stamp Duty before the changes were brought in by Osborne in 2015, but would now cost £153,750.
If the same £2m property is being bought as a second home, this would now cost £213,750, more than twice the bill a second-home buyer would have paid in 2014.
According to the research, Kensington has been one of the areas hardest hit by Stamp Duty reform. West Kensington W14 saw prices drop by 12.3% between Q2 2015 and Q2 2016, knocking over £160,000 off the value of the average home in the area.
A buyer purchasing a second home at the average price for properties in the W14 postcode in 2014 at £1,462,200 would have paid £73,100 in Stamp Duty. A second home at the same price would now cost £133,800, an increase of £60,700 or 83%.
Davies said: “Targeting top-end buyers of properties valued at over £1m might have been good politics at the time, but the policy is crippling prime central London, with potentially damaging consequences for the capital’s property market down the road.
“Most Londoners are unlikely to weep for wealthy second-home buyers, but the reality is that without movement at the top, the middle and lower end of the chain are being blighted by a shortage of available properties, leading to intense competition and spiralling prices.
“Higher income families are holding on to their homes rather than move up, while buy-to-let investors have all but disappeared, which in time will have a similar effect on the rental market.”
How does your region fare?
| Area | Post code | Average house price (Q2 2016) | Annual % change | Q on Q % change |
| Top 25% of London market | Greater London | £1,160,000 | -4.6% | -1.5% |
| West Kensington | W14 | £1,302,000 | -12.3% | -4.7% |
| Notting Hill | W11 | £1,450,000 | -9.6% | -3.7% |
| Kensington High Street | W8 | £1,713,000 | -6.2% | -1.6% |
| Maida Vale/Warwick Avenue | W9 | £1,209,000 | -5.8% | -2.2% |
| Fulham Parsons Green | SW6 | £1,203,000 | -5.3% | -2.0% |
| Earls Court | SW | £1,560,000 | -2.9% | -0.4% |
Meanwhile, Spencer Botchin, director of agents Sandfords, has echoed Stirling Ackroyd’s concerns and is also calling for the additional 3% Stamp Duty rate to be scrapped and improvements to the mortgage application process.
He said: “The additional hikes have hit those looking to buy a second home in London the hardest. Since the new legislation was introduced in April 2016, it has proven to be unreasonable, particularly for people wishing to save money. Banks are not offering great interest rates so people have been looking to invest their money elsewhere, but the surcharge is making this much more difficult.
“The overhaul in the UK’s property tax system has single-handedly caused chaos around London. The levy on properties valued above £1.5m rose to 12% back in 2014, but this needs to be lowered in order to generate further foreign investment which is vital for the Prime Central London market.
“I hope the new Chancellor, Philip Hammond, addresses the current mortgage process situation which is far too slow. It’s becoming almost impossible with banks taking too long with mortgage applications. The process needs to be made a lot quicker from start to finish as it’s currently slower than it has ever been due to the questions asked and the processes they go through to get what they need. Common sense at times needs to prevail.”
Research from Yorkshire Building Society showed 60% of first-time buyers would be more likely to buy a home if they didn’t have to pay Stamp Duty.
Most people would probably say yes to not having to pay, but 72% of aspiring home owners said it is difficult to meet up-front costs and 52% are saving less than £250 per month.
Instead the building society has asked the Government to consider reforming property tax to make it payable by sellers rather than buyers.
