While some in the property sector are wistfully chattering about how the Chancellor might reassess stamp duty rates in his Autumn Statement, Savills is of the view that a cut “is highly unlikely unless it is part of a much wider reform of property taxation.”
The current SDLT regime – which came into play with higher rates for higher-value homes in 2014 – “is a nice little earner” for the government, points out the firm’s research chief Lucian Cook. Plus, hiking transaction costs at the top end and slapping an extra levy on buy-to-let properties has succeeded in slowing down a London market that many thought was running towards bubble territory.
The Treasury’s overall SDLT haul has continued to step up quite notably in the years since G.Osborne’s tinkering. It brought in £2.35bn in Q2 2017, from £1.98bn a year earlier; that’s around a 19% increase year-on-year, and well above the £1.82bn under the old regime.
A November stamp duty cut may be unlikely, but many agents in PCL are still wishing for it… Jackson-Stops & Staff is lobbying for a 33% reduction in SDLT rates this Autumn, arguing that “prohibitive levels of Stamp Duty Land Tax are preventing the settled domestic market from buying and selling”. The firm says that domestic buyers are being thwarted by high transaction costs, while overseas investors continue to pile in on the back of favourable exchange rates.
“Potential buyers in central London used to approach us about their next home move, driven by factors like a growing family or need for a home with more bedrooms or a bigger garden,” says Toby Whittome, Sales Director at Jackson-Stops. “These are the ‘old reasons’ for moving, from before December 2014. Our purchaser registration numbers are up, but the fluidity of the market has diminished hugely. When buyers are looking at 20% transaction costs including stamp duty, solicitor’s fees and moving costs, the attitude becomes: ‘we’re better off staying where we are’.”
Despite much talk of a slowdown at the top-end of the property market, however, Savills points out that “sales of homes worth over £1m have remained remarkably robust” (17,700 in the last year) since SDLT changes started taking their toll. Deals in the £1-2m bracket actually stand 4% up on their old-SDLT level (although there has been an 8% drop in transactions in the last 12 months).
Prime sales “have definitely not collapsed”, says Cook – noting that a 14% tanking of £2m+ deal numbers in the last 12 months followed “surprisingly little change” in activity levels in the immediate aftermath of 2014’s tax system overhaul.
Jackson-Stops takes a different perspective. “If stamp duty levels weren’t causing so much harm to the million plus market I think we would see the health and fluidity at the lower to middle end of the Greater London market spread to the higher end too,” says the agency’s Chairman, Nick Leeming.
Leeming goes on to pitch for a significant reduction in stamp duty rates: “One recommendation is a UK-wide reduction in stamp duty levels of around a third, which should boost the property market at all levels, particularly at the million pound plus level. It is worth remembering that in central London typical family homes will likely be worth £1m or more and, with stamp duty levels preventing these homes entering the market, it means that families are unable to move up or down the property ladder when they need to.
44% of £2m+ transactions have been subjected to the additional 3% transaction tax
But the Treasury’s probably still smiling… The addition of a 3% surcharge on “additional homes” – widely seen as a slap in the face for buy-to-let investors – has added even more to government coffers, says Savills, boosting tax receipts and curbing some property price inflation, particularly in upper price brackets: a third of deals in the £1-2m range incurred the 3% levy, while a really quite chunky 44% of £2m+ deals have been subjected to the additional transaction tax.
“We don’t believe that autumn will bring a change to stamp duty,” concludes Savills’ Lucian Cook. “Rather, we think that buyers will have to continue to factor the higher rates into their budgets and sellers will have to continue to price realistically to achieve a sale as we go into the autumn market.”