The key changes affecting the property market were as follows:
• Stamp duty increased by 2% for properties over £2million to 7% from midnight
• Stamp duty on property owned by a non-resident entity increased to 15% with immediate effect
• Government to bring in new general rules to clamp down on tax avoidance as part of the 2013 Finance Bill plus a warning that this is likely to include retrospective measures

Prime property

I have to admit, the 2% stamp duty increase took the property market by surprise. It had been leaked to the FT that morning but no-one thought it would take effect immediately, so we were straight on the phone to our buyers for property over the new threshold and plans for Wednesday afternoon were scrapped as we assisted affected Clients to exchange before the midnight deadline, saving all concerned hundreds of thousands of pounds.

In the longer term, Manse & Garret Property Search are not forecasting significant change to prime property sales in prime central London. Clearly the £2 – £2.25m price bracket will feel some aftershock for a few months, but given the lack of supply and increasing demand for stock in the best areas, we don’t think the increase in stamp duty will have a marked effect.

However affected property just outside the centre is likely to take a hit. Popular areas from Richmond, Chiswick and Fulham to the West, Islington, West Hampstead and Muswell Hill to the North and Greenwich and Blackheath to the East are likely to suffer few sales between £2m and £2.25m in the months to come. Motivated vendors are likely to take a hit on price but many will stick to their guns and hold out for the extra hundred thousand and these sales will stick.

Although about 80% of the prime central London market is dominated by overseas investors and many people buy using a corporate structure, in the grand scheme of things, given the capital gains which are routinely made in prime central London, we don’t see the new rules making a difference to price. After all, the best apartments on the best roads from Knightsbridge, Belgravia and Mayfair to Chelsea and Notting Hill are appreciating at circa 20% per year. Most investors will hold prime central London real Estate for 3 years or more so although the 7% stamp duty is an irritation, it won’t make a difference to the logical investor. Also the factors driving the prime central London property market remain, ie political instability in parts of the middle east, the rise of emerging markets who want to keep their offshore earnings offshore but in a stable political and economic situation and global economic uncertainty which favours prime central London real estate as an asset class.

The good news for buyers is that the current low stock levels are likely to be improved for the next year or so, as those looking to sell, rush to do so, mindful of the threat of retrospective legislation, when it comes in in 2013.

Super-prime property

It is the buyers of super-prime property £15m plus who will suffer most from the budget 2012 and it will be interesting to see the effect on this area of the market. There is very little to choose from in this market, few are advertised officially and those which are available are frequently priced using a multiple of their true value. Most of these houses and apartments are used as pied-a-terres and I suspect some will struggle for a few months, while the tax advisors of the super-wealthy find a scheme to mitigate tax and the prospective buyers consider whether they still want an awe-inspiring place in the UK.

The sub-£2 million property market London and Country

There will inevitably be a number of investors with large portfolios of property held by offshore companies who decide to liquidate ahead of the 2013 Finance Bill. As a result we anticipate more stock coming to the market over the next year but whilst this will increase choice for buyers, we don’t think it will have a huge impact in price, although prices should hopefully stabilise this year and not make the significant gains seen during 2011.

Given the issues with very restricted supply and burgeoning demand, which are likely to continue, we definitely don’t see the measures reducing prices.

Technorati Tags: budget, capital appreciation, prime central London property, Stamp Duty, Tax

Tags: budget, capital appreciation, prime central London property, Stamp Duty, Tax

In reaction to today’s budget Managing Director Karelia Scott-Daniels said, “The 2% increase in stamp duty is unprecedented and a real blow for buyers in prime central London. Property related tax hits London and the South East disproportionately and is therefore unfair.”
“I don’t think it will affect overseas buyers purchasing in prime central London but it will inevitably put downward pressure on the £2m – £2.5m bracket from East to West, such as in Blackheath, Islington, Crouch End, Maida Vale, Richmond et al.”
“This government has been promising to close the tax loophole on the payment of stamp duty since before they were elected, so the 15% stamp duty on property bought in the name of an offshore company is not a surprise, nor is the fact that properties already held this way will be taxed annually hence forth. I am more surprised that it has taken two years for the Chancellor to announce these proposals.”
“It will have little if any effect on the levels of transactions to overseas investors. Time and again, prime central London real estate has held up as a solid investment during periods of global political and economic flux. Whether buyers are purchasing here to park funds in a safe haven, away from the prying eyes of government in their own countries or as a solid long term investment with good capital appreciation, the benefits of buying here far outweigh the new tax burden.”

Technorati Tags: budget, capital appreciation, prime central London property, ptime property, Stamp Duty, Tax

Tags: budget, capital appreciation, prime central London property, ptime property, Stamp Duty, Tax

A great many people aspire to own property in prime central London. Here at Manse and Garret we deal with hundreds of hard-working clients every year who want to put their money into a safe and useful investment. Those lucky enough to reach the lofty heights of the London property market often find themselves purchasing leasehold flats, not freehold houses – they’re more convenient as pied a terres which you can “lock up and leave”, they frequently make greater yields as investments and the ever-popular lateral flat provides larger open-plan living spaces more conducive to modern living. You would think that once you’ve worked hard enough to be able to afford just such an apartment, you should be free to use it however you wish.

However the perils of being a leaseholder, whether it’s for 999, 99 or 9 years, are always something to bear in mind. Leases often contain restrictions about how someone can live in their own flat. Most of the clauses are quite common and most people will have encountered them or heard of them; pets are frequently forbidden, the running of a business from a premises is prohibited and changes to the outside of your home often requires permission from the freeholder.

But leases can go even further than this – as the owners of a flat in Eaton Mansions have discovered, to their cost. These particular leaseholders installed a wooden floor in their £4.7 million flat in the exclusive red brick building, moments from the chic Sloane Square. They were subsequently sued by their downstairs neighbours who could no longer cope with the noise of constant footsteps above them. It turns out that the lease provided by the Grosvenor Estate – the freeholder of Eaton Mansions – prohibited the installation of wooden floors. Indeed, the lease went further, it required carpet in every room except the kitchen and the bathrooms. The case has been heard by the Court of Appeal and judgment has been reserved, so it remains to be seen whether the courts will come down on the side of carpet or hardwood flooring.

The lesson here, for anyone purchasing a flat, particularly when they are spending a significant amount of money, is to check the lease very closely. At Manse and Garret we spend much of our time combing through old leases looking for onerous clauses that could affect our clients. We would always seek to ensure that if someone won’t be able to lay a beautiful oak floor in their drawing room they know about it before any money changes hands!