A quick look at the bigger property portals suggests that there are more than 2,000 homes currently for sale with guide prices of more than £2m. In his Budget the Chancellor has decided that buying something at this level is now going to cost you 2% more by way of Stamp Duty Land Tax. What’s more, if you purchase a property ‘bought in a company envelope’ as Osborne puts it you can now expect SDLT to cost you 15%. Personally, I think that clarifying the position on ‘avoidance’ is way overdue and something that was widely expected. This should make it much clearer now for HM Revenue & Customs to collect the Stamp Duty due and although there will be impact on both those buying and those connected with the buying and selling of expensive homes the announcement is broadly neutral. As an example of the over reaction of some in the City Savills shares fell briefly on news of these changes.
The Government plans to discuss a levy or annual charge on those homes worth more than £2m and wrapped in a company. Expect the consultation to be noisy as this could effect 100,000 homes. This is as close to a Mansion Tax as the coalition Chancellor came but it may establish the principle for future Budgets.
I don’t think that these changes will have a significant impact on values. Don’t expect to see many homes priced at £2.25m for obvious reasons but buyers of homes at the very top of the market don’t tend to worry so much about ‘value’. Just as many people don’t view an expensive watch as a real cost compared to the price of an equally efficient, cheaper Swatch. It’s about the product and what it says about you and for many folk there’s value in that.
No worries for those who have already exchanged contracts on a property worth more than £2m but are yet to complete. They and those who manage to do so before the end of the day should find they squeak through according to HMRC notes just published.
620,962 homes sold in England & Wales in last year. Just 1,588 were for more than £2m and in London 84,728 were sold of which only 1,224 cost over £2m. These figures include those owned or ‘wrapped’ by companies. Those looking to buy a property in the UK, particularly those from outside the country will grumble about the additional 2%/10% cost but compared to leaving their money in north Africa or in the Euro-based economy the cost is well worth paying. What will be interesting is that I expect to see boom in lettings of the most expensive homes. Prepare to see agents opening ‘super-prime’ letting departments in short order.
Moving tax from income to wealth is not something I have seen debated widely so there may well be additional consequences but I don’t expect fewer homes to sell and the bigger news that will effect all of us – rich or poor will come next Tuesday when the hugely important and controversial National Planning Policy Framework is published.
The Chancellor has not announced changes to the rules on Real Estate Investment Trusts but has undertaken to consult on these later in the year. A disappointment and in my view a missed opportunity. The private rented sector still requires a leg up and the national housing crisis remains dire as a result of these short-sighted decisions.
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