George Osborne’s announcement on the latest stamp duty changes could cause significant damage to London’s property scene.
Merely a few hours after the new changes were made, reports surface that the Prime Central London property market went into “meltdown” with property companies and vendors pulling out of deals that would have otherwise been very beneficial to the parties involved.
With the introduction of a 15% stamp duty tax on homes worth more than £2 million that are bought through a company and a new 7% stamp duty rate on sales of residential property bought directly above £2 million, several of London’s estate agents with company buyers have opt out, simply because they are unwilling to pay this absurd 15% tax.
Ed Mead, who is the director at Douglas & Gordon was quoted saying – “I don’t think anyone has quite clicked that many of the properties at this price level are bought by a company through personal choice rather than a way to avoid stamp duty taxation. Most property companies buy for development through companies and they’re pulling out too.
In short, now anyone who purchases a property worth more than £2 million will now have to pay at lease £140,000 in tax on the transaction.
According to Adam Challis, who is head of research at Hamptons International, said the stamp duty increase could devalue 400 properties now likely to be marketed below the £2 million mark.
He goes on to say that with London’s economy relying heavily in it’s property market, this latest ruling will have a negative impact on transactions at the top end of the market and will disproportionately impact the London property market as a whole.
David Kilshaw, tax partner at KPMG, pointed out that the biggest blow to those with properties registered overseas would be the fact that savings on inheritance tax would be lower. He goes on to state that most overseas nationals bought their UK property via a company not to save the relatively modest stamp duty but to avoid inheritance tax.
With that in mind, Mr. Kilshaw believes that foreign investors will now look elsewhere when scouting for big properties for investments. Inheritance tax will now stalk the streets of Chelsea and this could change the whole dynamics of the London property scene.