Autumn Statement 2014, Property Drum
Stamp out Stamp Duty? Well, not quite... We’d have liked to see Stamp Duty abolished but we knew it wouldn’t happen. However, George dealt a master stroke to the opposition party with his dramatic – and very useful – immediate Stamp Duty reform. What a difference a day makes. Thousands of pounds saved in Stamp Duty payments – for 98 per cent of all homebuyers – will give potential buyers a real impetus to move. This was a carefully constructed bomb – just the ‘housing’ one of a whole salvo of missiles aimed at the Labour Party’s election campaign, while simultaneously reassuring Tory doubters about whether they should defect to UKIP, Labour or indeed anyone else. It will certainly catch the votes of most estate agents when it comes to the crunch next May. In his reply, Shadow Chancellor Ed Balls was left floundering for something to say, seeming for all the world to have been directly in the firing line of the Government’s first serious electioneering display. Vote-catching aside, this was a brave – and clever – way of reforming taxes without the obvious clumsiness of proposals by both Labour and the LibDems to introduce a ‘Mansion Tax’. Mr Osborne’s plan removes the need for a Mansion Tax, while the wealthy (that is, those able to afford more than £937,000 for a home) can console themselves with the fact that it is a one-off payment on purchase, rather than an annual harpoon of additional taxation.
Changes in a nutshell Current regime: Stamp Duty applies to all properties over £125,000. It was calculated in bands and even if the property was sold at £1 over the previous band, the whole percentage of tax was due on the whole of the purchase price – known as a slab system. New regime: Stamp Duty remains payable on all properties sold for over £125,000 but now buyers will only pay the rate of tax on the part of the property price within each tax band – like income tax.
Clobbering the rich Poor old George knows that you will never please everyone, so he has opted to risk the wrath of his wealthy chums – and their estate agents. Ed Tryon, Director of Lichfields property search agency, complains that the rich will be ‘clobbered.’ “Stamp duty has long been overdue for reform and I am sure that George Osborne’s changes will be politically popular, however, this is unbelievably damaging to the top end of the prime London market and I am staggered over this increase in the rate,” said Ed, “It will penalise those looking to buy over the £1.5 million and it will give little incentive for people to purchase over that level. Again this is another way of clobbering the rich in an attempt to butter up Middle England voters.” David Pollock, Managing Director at Greene & Co., was a little more positive, “This will have a short term negative effect on the upper market prices as buyers will initially be deterred from the idea of moving. However, those already in a £2m property will have to balance moving and paying extra stamp duty with staying where they are and risking mansion tax coming in next year. “However, in time the market will just price in these factors and with a fundamental shortage of property in London, people will have to accept them.” Nick Leeming, Chairman of Jackson-Stops & Staff, took a similar view, “This has emerged as the Osborne & Little Autumn Statement – with little incentive for property buyers at the mid to high-end of the market. It is a tax on mansion buyers. This rate of 12 per cent on properties above £5 million will penalise the London market and also hit the country house market. However, we welcome the changes on stamp duty at the first-time buyer end of the market as this will help to stimulate activity at that level.”
‘Shooting the running fox’ Gideon Sumption of Stacks Property Search says, “We welcome the new SDLT reforms. An antiquated system has been reorganised in a much fairer way. It’s good news for the majority of property buyers, but the best news for the market as a whole is that, without the threat of the proposed Mansion Tax, the upper end of the market will be freed up, and buyers can act in the full knowledge of what tax will be payable. “The biggest difference is that this SDLT system is effectively discretionary rather than mandatory. The Mansion Tax system would have penalised those who already lived in properties worth more than £2m. The new system, announced today, only affects those who choose to buy. “There’s a likelihood that sales at the £2m mark will be affected. In the short term there is likely to a frenzy of re-negotiation at this level, and there will be a greater proportion of sales falling through in the coming weeks. “But in general terms, congratulations Mr Osborne for shooting the running fox that was the shockingly unfair spectre of the Mansion Tax. The vast proportion of buyers, and the health of the property market, will be better off for it.”
Brightening the UK housing recovery Peter Rollings, CEO of Marsh & Parsons, commented, “This Stamp Duty shake-up is long overdue, and the abolition of the archaic slab system will take the sting out of the tail for thousands of buyers on the lower rungs of the ladder. The new graduated system should help brighten the UK housing recovery in regions outside of London, where property prices are still battling back to pre-recession levels – but it will add to the weight of the tax burden shouldered by those buying more expensive homes. In Prime parts of London, where 56% of property is worth £1million or more, this will impact a significant proportion of ordinary working families.” “But any additional strain on the top tiers of the housing market will be absorbed, and the natural rhythm of the property market won’t be disrupted. Buyers investing in Prime London property are accustomed to having to pay a higher price than elsewhere across the country, but the unparalleled returns and capital growth on offer more than make it worthwhile, so demand won’t be quashed.” Liz Peace, Chief Executive of the British Property Federation, said that the changes will help to free up the market and get people moving into the homes that they want and, “We are pleased to see other reliefs remain, such as for multiple dwellings, which is very important to the build-to-rent investment sector. Some issues however remain, and we look forward to working through these with officials in the coming weeks.
And finally… Jeremy Blackburn, Head of Policy at RICS said, “Time and time again RICS has called for these changes to stamp duty structure, which now mean 98% of house buyers will benefit. These changes reduce distortion and ensure those at the top end of the market contribute fairly, while those at the bottom will be given a fairer chance to get on the ladder, cutting out ‘dead zones’ in the market"