Prime central London softened for the second consecutive month in December against an increasingly unpredictable political backdrop.
January 15th 2015
At the start of December, Chancellor George Osborne increased stamp duty for properties above £937,500 in a move designed to out manoeuvre his political opponents five months from the general election. Following a spike in transactions before the new system came into effect at midnight on 3 December, there has been a period of tougher negotiation between buyers and vendors that in some instances has led to prices adjusting downwards slightly to account for the new higher charge. Some sellers and buyers opted to split the difference between the old and new charges and overall there has been minimal evidence to date of deals falling through. Firstly, it indicates how likely the prime central London market is to absorb the changes in the short to medium term. The market has reacted in a largely level-headed manner to previous similar changes, including a rise in stamp duty to 7% from 5% for properties over £2 million in March 2012. Despite negative forecasts at the time, prices have since grown 17% in the £2 million to £5 million price bracket, as figure 2 shows. Second, there has been a debate surrounding the taxation of high-value residential property, including the proposed mansion tax, for more than five years. The composed initial reaction to the stamp duty changes and the fact annual growth has been moderating for three years indicate the market has priced in some form of political intervention. However, that is only true up to a point and uncertainty remains over the possibility of further property taxes after the election. After December’s stamp duty changes and an OECD report this month showing UK property taxes as a proportion of total tax revenues are already the highest in the world, the case for further property taxation is significantly weaker than it was in November
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Prime central London softened for the second consecutive month in December against an increasingly unpredictable political backdrop.
January 15th 2015
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At the start of December, Chancellor George Osborne increased stamp duty for properties above £937,500 in a move designed to out manoeuvre his political opponents five months from the general election. Following a spike in transactions before the new system came into effect at midnight on 3 December, there has been a period of tougher negotiation between buyers and vendors that in some instances has led to prices adjusting downwards slightly to account for the new higher charge. Some sellers and buyers opted to split the difference between the old and new charges and overall there has been minimal evidence to date of deals falling through. Firstly, it indicates how likely the prime central London market is to absorb the changes in the short to medium term. The market has reacted in a largely level-headed manner to previous similar changes, including a rise in stamp duty to 7% from 5% for properties over £2 million in March 2012. Despite negative forecasts at the time, prices have since grown 17% in the £2 million to £5 million price bracket, as figure 2 shows. Second, there has been a debate surrounding the taxation of high-value residential property, including the proposed mansion tax, for more than five years. The composed initial reaction to the stamp duty changes and the fact annual growth has been moderating for three years indicate the market has priced in some form of political intervention. However, that is only true up to a point and uncertainty remains over the possibility of further property taxes after the election. After December’s stamp duty changes and an OECD report this month showing UK property taxes as a proportion of total tax revenues are already the highest in the world, the case for further property taxation is significantly weaker than it was in November
Prime central London softened for the second consecutive month in December against an increasingly unpredictable political backdrop.
January 15th 2015
At the start of December, Chancellor George Osborne increased stamp duty for properties above £937,500 in a move designed to out manoeuvre his political opponents five months from the general election. Following a spike in transactions before the new system came into effect at midnight on 3 December, there has been a period of tougher negotiation between buyers and vendors that in some instances has led to prices adjusting downwards slightly to account for the new higher charge. Some sellers and buyers opted to split the difference between the old and new charges and overall there has been minimal evidence to date of deals falling through. Firstly, it indicates how likely the prime central London market is to absorb the changes in the short to medium term. The market has reacted in a largely level-headed manner to previous similar changes, including a rise in stamp duty to 7% from 5% for properties over £2 million in March 2012. Despite negative forecasts at the time, prices have since grown 17% in the £2 million to £5 million price bracket, as figure 2 shows. Second, there has been a debate surrounding the taxation of high-value residential property, including the proposed mansion tax, for more than five years. The composed initial reaction to the stamp duty changes and the fact annual growth has been moderating for three years indicate the market has priced in some form of political intervention. However, that is only true up to a point and uncertainty remains over the possibility of further property taxes after the election. After December’s stamp duty changes and an OECD report this month showing UK property taxes as a proportion of total tax revenues are already the highest in the world, the case for further property taxation is significantly weaker than it was in November
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