Higher stamp duty lessens appetite for real estate investment in central London
House prices in London’s most expensive boroughs rose at their slowest pace in five years last month as the appetite for real estate investment was eased by higher stamp duty, according to recent research by real estate firm Frank Knight. The research showed that the average cost of a home in prime central London was1.7 percent higher in August compared to a year ago. This was the lowest annual rate of house price growth since November 2009.
“Demand in prime central London was unsurprisingly restrained in August. It is typically one of the quieter months of the year,” said Tom Bill, head of London residential research at Knight Frank, as quoted by The Times. “However, this seasonal trend was compounded by the fact that buyers have been coming to terms with higher stamp duty and uncertainty in global financial markets,” he added.
In December Chancellor of the Exchequer George Osborne introduced a new stamp duty structure, under which buyers of more expensive properties would pay comparatively more than those at the lower end of the market. For example, the new system raises £117,750 in stamp duty on a £1.7 million property, up from the £85,000 that would have been charged under the old structure.
Overall, it has so far been a slow year for luxury property sales in the UK. In the run-up to the general election, between January and April,sales excluding new-build properties in prime central London were down by an average of 48 percent from the same period a year earlier. The market saw an improvement in the May-to-July period, narrowing the decline to 20 percent. Meanwhile, according to figures from the Land Registry, the number of million-pound-plus sales in England and Wales had declined 21 percent to 878 in May.
Knight Frank’s research does however suggest that Chinese property investors have stepped up their interest in “safe haven” markets such as London. However, the report says that it is too early to see any impact on transaction levels.