31 July Stamp duty rise failed to depress the sales of £1 million-plus homes
An overhaul of stamp duty rates two years ago has made almost no difference to the sale of homes costing more than £1 million, despite such transactions becoming significantly more expensive, according to latest figures.
The total number of sales above £1 million fell by 9 per cent in the 12 months to June compared with the previous year. However, this comparison is distorted by a rush of buyers in the first three months of last year who wanted to beat an extra 3 per cent stamp duty surcharge on second homes and buy-to-let properties.
In comparison, the number of homes that were sold worth more than £1 million fell by only 1 per cent compared with the same period in 2014, according to figures from Revenue & Customs. There were 17,700 sales, compared with 17,900 in 2014.
The numbers are likely to surprise some estate agents and housebuilders, which have claimed that the reform of stamp duty rates at the end of 2014 has dramatically affected the upper end of the market and caused a slump in sales.
Lucian Cook, director of residential research at Savills, said: “To the surprise of a lot of the industry, the number of £1 million-plus sales have stood up incredibly well, despite much greater exposure to stamp duty from a succession of increases and new charges.” The stamp duty “slab” system was replaced in December 2014 by a progressive threshold that reduced costs for those buying homes priced up to £937,500 but prompted a 10 per cent rise in transaction costs for properties valued at more than £1 million and a 12 per cent rise for homes above £1.5 million. This meant that a home costing £1.5 million would incur charges of £93,750 in stamp duty.
Estate agents claimed that this had caused a significant slump in demand for higher-priced homes. Rob Perrins, chief executive of Berkeley Homes, said that the system was “stopping social mobility and will result in lower GDP and fewer homes getting built”.
Mr Cook said that the government was unlikely to make any changes to the stamp duty rates. “The figures probably hide a bit of rebalancing between the rest of the country and London, which has been much more price-sensitive at the top end,” he said. “Still, the numbers suggests the market will have to continue to get used to this higher taxation environment.”
Sales of homes above £2 million have been affected more by the reforms. Transactions fell from 4,200 in the year to the end of June 2016 to 3,600 this year, a 14 per cent fall. They are also down 16 per cent on the total number sold in 2014.
Since the 3 per cent stamp surcharge was introduced in April last year, the government has collected £2.2 billion on the tax, the figures reveal. In the year since last June, that figure was £1.9 billion, equivalent to 22 per cent of all residential stamp duty receipts, which came to a total of £8.9 billion over the period.
The tax was introduced by George Osborne in an attempt to dampen the buy-to-let sector and make more homes available to first-time buyers, but it also has become a source of revenue for the government.
According to separate figures released at the same time, the amount that families paid in inheritance tax reached a record last year, with £4.84 billion going to the taxman because of rising house prices and a climbing stock market. Inheritance tax payments rose by 4 per cent compared with the previous year, reflecting the increase in household wealth. The government has frozen the level at which inheritance tax kicks in at £325,000 since 2009, although this is set to change in 2020.
The Times – 29th July 2017 – Written by Tom Knowles
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