Stamp Duty Allowance

Announced in March 2010 by the Labour Party, the increase in the stamp duty on residential property purchases over £1,000,000 increased on April 6^th from 4% to 5%. This increase is intended partially to fund the tax gap created by doubling the stamp duty allowance for first time buyers to £250,000.

One effect on the housing market in London has been that although property has come to the market between January and March, there has been no shortage of prospective buyers, particularly at the top end of the prime central London market, encouraged by bonus figures being released at the start of the year. Selling and buying has been frantic; the prospect of paying an extra 1% on top of a purchase has put pressure on people to move before April. There have been bids and good offers on those properties which have been reasonably priced at the beginning of this year. We have seen properties selling at and above asking price before they have even fully come onto the market – not quite at 2007 levels, but certainly reminiscent of the pre-crash boom.

A consequence of this is that the dearth of property is now even worse than it was at the beginning of the year, and there remain many frustrated high-end buyers, not best pleased by the knowledge that the purchase of a home will cost them upwards of £10,000 in additional tax.

It is likely that the 5% stamp duty will be with us for the foreseeable future, as the government needs the revenue and luxury, top end property is an obvious source for it, to a government conscious of its electoral viability. The majority of buyers at the top end of the market who are most likely to be affected by the increase in stamp duty will be the plethora of overseas buyers and will not be a part of the electorate.

The shortage of property exacerbates the demand in prime central London and key towns in the South-East, where property remains a favourite with overseas investors. The unrest in the Middle East and the recent declaration by Portugal will encourage investors further into the prime central London market which continues to be perceived by most as a comparatively safe place to invest in property.

Technorati Tags: First time buyers, House Prices, House prices in London, investors, London property, London property market, london property market news, property investors, Stamp Duty

Tags: First time buyers, House Prices, House prices in London, investors, London property, London property market, london property market news, property investors, Stamp Duty

Rantings of a disgruntled London Property Finder

Today we spent the day out of the office at the IOD annual convention, in the Royal Albert hall.  Politicians never confirm until late in the day so Alistair Darling late entry as the first speaker was an interesting start to the day.

Given the audience, the Chancellor’s principle objectives were to defend the need for additional taxation particularly the new 50% tax  and also shouting about all the concessions and help the government is giving to smes.

Justifying the need for additional taxation, our hearts bled to hear Alistair Darling bemoaning the enormous hole in govenment revenue since the beginning of the recession due to amongst other things, the fall in stamp duties collected.Rather an interesting point to make to a hall full of business people, given that during these difficult times we need to make pragmatic decisions every day. For example, whether it is better to have a proportion of a little or all of nothing.

The Chancellor has missed a trick with stamp duty. Reducing the rate of stamp duty payable on properties below 500K would have helped boost transaction numbers which could in turn have boosted the revenues the government gains from property and boosted confidence in the property sector and the economy as a whole.  First-time buyers who we work with, tend to buy properties worth £400,000 and above.  Assuming they don’t spend over half a million, that means stumping up 3% stamp duty or using one of the avoidance schemes.  For the many who don’t have helpful accountants or London Property Finders like me, that means finding an additional £13,500 for a flat purchased for £450,000 – the price of a good 2 bed flat in a great area in London.  Typically we will charge just short of £7,000 for finding the fabulous flat – but then we would have introduced the buyer to property they would never have found on their own and negotiated a great deal which won’t fall through.  What does the Chancellor do?

Temporarily cutting stamp duty by half for property below £500K would make a real impact on the London property market and the Chancellor would gain a little of alot rather than a great deal of very little!This London Property Finder thinks it would have been a welcome if pragmatic course of action

Technorati Tags: First time buyers, London Property Finder, London property market, london property market news, Stamp Duty

Tags: First time buyers, London Property Finder, London property market, london property market news, Stamp Duty

Rantings of a London Property Search Agent

Well it could have been a very different afternoon could it not? 

Stamp duty, REITS, empty rate relief and clarification on regulation for buy-to-lets: there is really no good news.  And what on earth are they doing pushing £80m into shared ownership schemes: pushing hard pressed first-time buyers into quarter/ half shares of over-priced one bedroom flats?  It’s a nonsense!  But don’t get me started on that little chestnut!  

Acknowledging that the housing sector is key to the recovery of the UK economy, Alistair Darling said: ‘the key to the health of our society is the long term supply of housing€™ so the government are supporting the construction industry to ensure more homes are built with £500million for stalled schemes and a further £100m to encourage local authorities to build green homes.

I’ve got mixed feelings about this to be honest, because mass-produced new-build is notoriously over-priced and frankly, unfortunately developers and investors caught in the headlights need to live with the consequences.   This is a long term fix, but has been widely criticised by the developers it is designed to help, for being unclear.  Given the fiasco of the mortgage support scheme, that is an entirely fair point.  Interestingly, although most banks closed their book to developers last year, self-builders are not struggling to get finance.  It this because their due diligence is not dependent on unsustainable sales figures?

I am most irritated about stamp duty.  Significant reductions  for property sub-£500K where 3% is payable would have assisted the market and injected a little confidence.  The extension of 0% stamp duty for transactions up to £175,000 for the rest of the year is certainly welcome, but so much more could have been done.  This is not going to help many buyers in London and therefore is pretty much irrelevant to the property market in the capital.

Technorati Tags: Business rate relief on empty properties, London property, London Property Search Agent, REITs, Stamp Duty, The budget

Tags: Business rate relief on empty properties, London property, London Property Search Agent, REITs, Stamp Duty, The budget