Since the Chancellor stood up at the Dispatch Box last Wednesday to deliver his Budget, there has been plenty of disquiet among those who work at the top-end of the property market.
We had a feeling it was going to be tough, with leaks before Budget day trailing the increase in Stamp Duty Land Tax on properties over £2m from 5 per cent to 7 per cent. But there was a staggeringly big shock in store when the Chancellor announced an increase in stamp duty for offshore companies buying residential properties to 15 per cent, up from 0.5 per cent. Ouch.
These changes will inevitably have a considerable impact on the housing market at the upper end. The 7 per cent levy is already having an impact on pricing, with one of London’s finest buying agents telling us today that there is no point trying to sell anything with a ‘2’ at the front – it either needs to be £3 million-plus or £1m-plus. Anything that is £2m-plus will simply not sell. Indeed, she reports sales falling through at the last minute as buyers shy away from paying tens of thousands of pounds more in tax that they simply hadn’t budgeted for. And why would they?
Even more of a worry is the 15 per cent duty, which is potentially catastrophic. While the 7 per cent duty will largely be absorbed into the price of a home, almost doubling this to 15 per cent for corporates puts them at an extremely unfair disadvantage. Yet someone buys property through a company not necessarily because they intend to dodge paying tax. It may be due to privacy, for example, or some other expedient measure.
And indeed, the vast majority do pay stamp duty: estate agent Wetherell analysed its sales of residential property in Mayfair since 1 October 2008 and found that although 79 per cent bought in a company name, some 97 per cent paid stamp duty. Wetherell said that with 64 per cent properties costing £2m-plus going to overseas buyers and three quarters of these using a company vehicle, it suggests that they took professional advice for inheritance, capital gains or privacy reasons. All eminently sensible one would think, although this Government clearly disagrees.