Home buyers spending more than £2 million will have to pay stamp duty of 7%, as Chancellor George Osborne confirmed in his 2012 Budget.
The stamp duty change means anyone purchasing a property above the £2 million threshold will now pay a minimum of £140,000.07 in SDLT (Stamp Duty Land Tax) on the transaction says Christian Harper of London's fixed-fee estate agent OliverFinn: 'It will cost buyers an extra £40,000.02 if they are buying at £2,000,001 and although it’s been branded a buyer’s tax, it may actually cost the seller more in the short term." The measure will potentially push down the price of properties valued at £2 million and just over, adding another tier to the current stamp duty thresholds of £250k, £500k and £1m. Selling a house at £2.1m wil be much harder than yesterday therefore clients will either be forced to mark down prices to attract 5% STLT payers or increase the asking price to £2.5m.
Impact on London property market
"The effect on the market will be that properties worth just under the £2m will remain at this level for a much longer period as they will need to increase in value to £2.2m before buyers will continue to drive their offers under £2m." So in the short term, properties valued between £2-2.5m will suffer the most impact. Properties valued from £2.5m upwards will be far enough away from the threshold so as not to impact buyer's perceptions.
Moving tax
The increase will disproportionately impact the London property market. According to Land Registry figures, of the 121 properties sold for over £2m in England and Wales in November 2011, 98 were in London. Longer term it won't make that much difference to buyers says Harper, but it will change how often people move: "It’s more like a moving tax because you have to hand over a minimum of £140k to the Government to move. So transaction levels might slump in the short term however I feel that the new SDLT level will soon be considered as 'the norm' and it will be business as usual."
CURRENT STAMP DUTY THRESHOLDS
- 1%: Properties of £125,000 to £250,000, but first-time buyers are exempt until 24 March 2012
- 3%: £250,000 to £500,000
- 4%: More than £500,000
- 5%: More than £1m, residential property only
The new 7% stamp duty land tax provision on properties worth over £2m comes into effect from 21 March 2012 .
Impact on London property market
"The effect on the market will be that properties worth just under the £2m will remain at this level for a much longer period as they will need to increase in value to £2.2m before buyers will continue to drive their offers under £2m." So in the short term, properties valued between £2-2.5m will suffer the most impact. Properties valued from £2.5m upwards will be far enough away from the threshold so as not to impact buyer's perceptions.
Moving tax
The increase will disproportionately impact the London property market. According to Land Registry figures, of the 121 properties sold for over £2m in England and Wales in November 2011, 98 were in London. Longer term it won't make that much difference to buyers says Harper, but it will change how often people move: "It’s more like a moving tax because you have to hand over a minimum of £140k to the Government to move. So transaction levels might slump in the short term however I feel that the new SDLT level will soon be considered as 'the norm' and it will be business as usual."
CURRENT STAMP DUTY THRESHOLDS
