7 February Stamp Duty Revenues rise to over £8 billion – a resilient property market
Successive increases in stamp duty including the buy-to-let surcharge of 3% on second homes last April has failed to dampen Stamp Duty receipts. According to government figures, Stamp duty surcharge on buy-to-lets generated nearly £1 billion of revenue in the last 6 months of 2016. Overall Stamp Duty on residential homes climbed to £8.28 billion in 2016, 17 percent higher than the previous year. Those hoping for a change of government policy on Stamp Duty are likely to be disappointed. In addition the tax take from residential properties owned by offshore companies jumped 53% to £178 million as the Treasure tightened its grip on home ownership structures used by wealthy foreigners.
The number of homes sold have has fallen as much as 47 percent since the last rise in Stamp Duty in April last year. Such a steep decline would suggest that Sellers will have to adjust their prices and expectation downwards. However, London property prices have remained remarkably resilient; their is a chronic shortage of housing stock, few Sellers are under any real pressure to sell due to low interest rates and the equity built up in their homes after several years of successive price rises. In addition, depreciated sterling, global political and economic uncertainty and the possible disintegration of Europe at least politically makes central London property an attractive asset class, often considered to be a safe haven, and a good hedge against inflation. House prices may have adjusted by around 5-10 percent in prime central London but not nearly as much as some commentators have predicted; the market is slowly assimilating the increases in Stamp Duty and Brexit concerns as the recent stamp duty revenue figures highlight.
We have seen a steady number of enquiries from local and international buyers and transactions go through; Vendors will have to remain realistic on sale prices to achieve sales. On the other hand, Buyers should not expect deep discounts except perhaps on new build properties, as the numbers would suggest below. This year we expect sales volumes and prices to remain broadly flat.
New Build Oversupply
Sale of London Homes under construction has dropped to the lowest levels since 2012. Purchases of homes currently being built have fell 22 percent in 2016 to 20,695 from a year earlier. The number of unsold properties that are under construction has surged to 25,139 units in the period. It will take 1.3 years to sell the properties that have yet to find a buyer (Source Molior). House builders share prices, which slumped 37 percent in the days after the Brexit vote are now 15.6% below pre-vote levels. We see a buying opportunity for new build properties from developers who are under pressure or investors who are unable to complete.
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