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

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