Uk
Stamp duty change more of an impact than Brexit on prime central London
Stamp duty change is more of an issue for the prime central London sales market than the UK leaving the European Union, new research suggests. However, the vote to leave the EU has created a backdrop of short term uncertainty that is affecting behaviour in the prime central London property market. As a result prices are now down 1.5% compared to a year ago and the number of new prospective buyers has fallen by 6.2% over the same period, according to the latest index from real estate firm Knight Frank. The index report also shows that the number of exchanges, including new build properties, fell by 10.5% in the first half of 2016 but the number of viewings was 40.8% higher than in 2015. However, the sub-£1 million market registered a relatively stronger performance, with annual price growth of 1.1%. According to Tom Bill, head of London residential research, early indications suggest the Brexit vote is reinforcing existing pricing trends and viewing the referendum in the context of the preceding two-year period is helpful. In June 2014, annual growth in prime central London was 8.1%, the last peak before a period that saw growth fall steadily to -1.5% in July 2016. ‘This slowdown was a natural consequence of strong price rises between 2009 and 2013, however the process was accelerated by two stamp duty increases and a series of other tax measures,’ said Bill. ‘Despite the widespread media coverage devoted to the EU referendum and its potential impact on house prices, the primary factor curbing demand in prime central London remains stamp duty. The result of this two year slowdown is that vendors had already begun to adapt to the new pricing environment and in many cases Brexit has been a trigger to make overdue reductions to asking prices,’ he explained. ‘Indeed, had the result of the referendum been a victory for Remain, it is likely there would have been a similar mismatch between expectations and reality that followed the 2015 general election. Following the formation of a majority Conservative Party government, high stamp duty costs acted as a brake on demand that was widely expected to surge. Since the vote, a number of buyers have requested discounts due to the climate of political and economic uncertainty,’ he pointed out. ‘However, where the asking price was set at an appropriate level before the vote, deals are proceeding with no reductions. In other cases, the Brexit vote has encouraged vendors to show increased flexibility. It is too early to say whether the reductions are likely to trigger higher transaction levels,’ he added. Bill also pointed out that there is no uniform picture across London and the situation is compounded by thin trading during seasonal summer lull. However, it is possible to see the benefit of recent downward repricing in some markets. In Belgravia overly ambitious vendor expectations, which had led to weak trading over the past two years, has been replaced by a more realistic approach from… Continue reading
Call for stamp duty on property purchases in UK to be abolished
A new report calls on the government to undertake real reform to tackle the housing shortage in the UK and in particular to abolish the stamp duty payable on home purchases. According to the TaxPayers' Alliance successive governments have avoided meaningful reform, instead focusing on tinkering around the edges which has only served to worsen the situation and drive up prices. It says that recent tax changes will drive up rents and the recently implemented 3% stamp duty additional homes surcharge and new restrictions on finance cost relief will also advantage richer prospective buyers at the expense of poorer tenants. The TPA says stamp duty is an unfair tax which stops people from buying their own home, settling down with a family, moving for work or downsizing and makes the dream of home ownership ever more distant for millions of families. The report explains that the 3% stamp duty additional homes surcharge will help prospective buyers but it will hurt tenants in rented accommodation and the restriction of finance cost relief for individual landlords will also advantage prospective buyers at the expense of tenants. It believes that both policies will distort housing markets, with implications for incomes, employment and overall welfare and the tax hikes make Britain’s complex tax system even more complicated and distort ownership structures. Other local policy choices such as increasing the cost of houses in multiple occupation (HMO) licences and introducing landlord licencing schemes will hit tenants and as existing owner occupiers take advantage of lower house prices this will result in a tightening of supply conditions in the lettings market, raising rents. The report calls for the stamp duty surcharge to be cancelled, for all stamp duty rates to be halved immediately in a run up to the tax being abolished and reform to planning restrictions to declassify some green belt land and allow taller, denser construction in urban areas. It explains that pressure needs to be taken out of the housing market by making land available for development less rare and less expensive to build on and says that declassifying just 5% of the green belt around London would allow the city to expand by almost a sixth. ‘For decades politicians have failed to tackle the root causes of the housing crisis: a chronic lack of supply. What's more, Stamp Duty is still punitively high and gimmicky tweaks to the tax system will ultimately end up penalising tenants and increasing rents,’ said Jonathan Isaby, chief executive of the TaxPayers' Alliance. ‘The new Chancellor should now seize the opportunity to drastically simplify and reduce property taxes as well as liberalise planning restrictions, which prevent huge swathes of land from being built on for no good reason at all,’ he added. David Cox, managing director of the Association of Residential Lettings Agents (ARLA) said he would welcome a renewed debate on property tax. ‘ARLA has been consistent in our view that increasing tax for landlords will increase rents and reduce property standards… Continue reading
Latest RICS survey confirms UK price growth slowdown
UK house price growth, especially in London, is slowing after the historic vote to leave the European Union, according to the latest data from the Royal Institution of Chartered Surveyors. The monthly report from RICS posted the lowest survey reading in three years in July. Just 5% more respondents nationally saw a rise rather than fall in prices, down from 15% the previous month. This downward trend that is evident across the UK and the London price indicator remains more downbeat with net balance of -33% which is broadly consistent with an outright drop in prices in the capital but not quite as sharp as that reported in June. The report also says that as price growth slows for now, near term price expectations across the UK were negative for the third month in succession with 12% more respondents predicting a decline in house prices over the next three months. It is the longest stretch of negative readings since 2012. As activity falters, interest from new buyers in the UK also continues to wane, with the results showing a fourth consecutive month of falling demand to a net balance of -27. Notwithstanding the potential for near term weakness, respondents are slightly more optimistic about the 12 month outlook, upgrading their estimates for price growth relative to June. The latest data shows the net balance of those expecting prices to increase over the year ahead rising from zero to 23% but this still represents a significant softening compared to six months ago, when 66% more surveyors anticipated rising prices. For the second month running, the regional breakdown shows London and East Anglia are the only areas in which prices are expected to fall over the year ahead. Nonetheless, London exhibits amongst the strongest projections over the medium term three month average, with respondents pencilling in around 4% growth, per annum, over the next five years. On the same basis, prices are expected to rise by close to 3% nationally. The report also points out that the acute shortage of property for sale appears to be providing some underpinning for prices at present. Indeed, after staging a mild recovery through the early months of 2016, average stock levels on agents’ books have since started to fall again. In fact, the flow of new sales listings coming to the market has contracted at the fastest monthly pace on record in each of the last three reports. With supply at or around record lows in most parts of the UK, lack of choice may weigh further on activity going forward. New buyer enquiries declined markedly at the headline level during July, the fourth consecutive month of falling demand. This weakness was widespread, with virtually all areas of the UK experiencing a dip in demand during July. In keeping with the deteriorating demand backdrop, sales volumes declined sharply and at the national level, a net balance of 34% more respondents reported a fall in sales… Continue reading
