The 2012 Budget – the property perspective from Zoopla
1. Introduction of a 7% stamp duty land tax on £2m+ homes
The Government decided to exclude an annual mansion tax levy from the Budget, but from Midnight tonight, a new Stamp Duty Land Tax rate of 7% to be introduced on property for sale over £2 million
Here’s our view: “The UK already imposes the highest property taxes in the world, as a proportion of GDP, with the top-end of the market bearing the biggest burden. The introduction of a penal 7% stamp duty rate on properties purchased at over £2m is flawed and misguided in our view. The expectation that this new rate will generate £1.5bn is at odds with our research which shows that had this 7% rate been in effect over the last two years, it would have only generated £634m in revenue. And with 77% of properties sold over £2m in London this is as much a tax on Londoners as it is on the wealthy.
“This move will not only affect the wealthy but is likely to have an adverse impact on the entire property market. We’re likely see a slump in activity from buyers at the top level and this will have a knock-on effect all the way down the chain. And whilst the government has stated that it wishes to crackdown on stamp duty avoidance schemes, this new rate is only likely to encourage the wealthy to find even more ways to avoid paying it. Unfortunately, the economics of this hike don’t measure up to the populist moves behind it.”
Regional breakdown of properties sold over £2m in the last two years
|Region||Av. sold price – last 2 yrs||No. of £2m properties sold|
|East of England||£2,494,688||90|
|North East England||£2,683,333||9|
|North West England||£2,690,353||43|
|South East England||£2,794,706||509|
|South West England||£2,657,855||76|
|Yorkshire & The Humber||£3,775,000||2|
London Borough breakdown of properties sold over £2m in the last two years
|London boroughs||Av. sold price – last 2 yrs||No. of £2m properties sold|
|City of London||£2,330,000||3|
|Hammersmith & Fulham||£2,922,685||139|
|Kensington and Chelsea||£3,640,483||672|
|Kingston upon Thames||£4,055,571||14|
|Richmond upon Thames||£2,735,335||106|
2. Stamp duty avoidance clamp down
Ahead of this budget, Chancellor George Osborne confirmed he will be “coming after” stamp duty avoidance with “aggressive” new measures in this week’s Budget.
He has confirmed: 15 per cent charge on transfers of £2m plus homes into corporate ownership
Here’s our view on the Government’s move to clamp down on stamp duty avoidance: It’s difficult to argue against a clamp down on stamp duty avoidance as, for the vast majority of people, stamp duty is an unavoidable truth that comes with the territory of home ownership. But knowing that some buyers are able to avoid it through various financial means is a difficult pill to swallow. Ensuring the Treasury is in receipt of all the tax due on all UK property transactions will help avoid a situation in the future where additional property levies are needed to make up the fiscal short-fall. However, policing the clampdown will be difficult and there are no guarantees that some transactions won’t slip through the net. There is no doubting the Government’s intention, but it remains to be seen if this will be an effective measure.”
3. Changes to first-time buyer stamp duty regulations
This was not mentioned in the Budget, however…
In 2010 the Government removed stamp duty for First Time Buyers on transactions up to £250,000 in a bid to spark sales and get chains moving. Two years later the 1% stamp duty tax will return (this Saturday 24 March) for property for sale purchased between £125,000 to £250,000. This was not mentioned in the Budget, but is confirmed here.
Here’s our view: “As a proportion of GDP, the UK already has the highest property taxes in the world. But stamp duty for first-time buyers, in revenue terms, is the fiscal equivalent of a mosquito on a rhino’s back. The Government believes the stamp-duty holiday has not been significant in encouraging first-time buyers into the property market and that is why they are scrapping it, but there are a number of other factors which have prevented the surge of buyers the government was originally hoping for. High inflation, low savings rates and strict lending criteria have all contributed to low first-time buyer numbers, but these are starting to ease. Inflation is falling, and lenders are becoming more flexible in their criteria so now is not the time to throw another obstacle onto the tracks.
“Over the last two years the taxman has missed out on just £650m from first-time buyers who have bought within the £250,000 threshold but the 5% rate on properties over £1m, introduced at the last budget, has pretty well covered this shortfall netting nearly £550m in just twelve months. Given the importance of first-time buyers in providing the first link in the property chain, the government should be doing everything possible not to deter these buyers and allow them to energise the rest of the market. This will lead to a higher levels of activity further up the property ladder and, in turn, higher tax revenues to bolster the Treasury’s coffers. However, it appears that the Government is focusing on a short-term strategy and while initiatives such as the NewBuy scheme are intended to compensate, in reality this will only help a small number of buyers and do little to assist the property market as a whole.”