Home Sales Surged in the U.K. as Buyers Rushed to Avoid New Tax

The number of homes sold in the U.K. surged by around three-quarters in just one month as buyers of second homes and rental properties rushed to beat a new 3% sales tax surcharge introduced at the beginning of April. Official figures out Thursday showed that the number of sales jumped 75% from 92,690 in February to 141,310 in March. When compared with a year earlier, sales were up by around 77%. Also see: 5 Mansions Where You Can Live Like J. Lo — for Millions Less This came as separate figures from the Council of Mortgage Lenders (CML) found that gross mortgage lending rose by 43% between February and March to £25.7 billion (about $37 million), the highest amount for that month since 2007 before the financial crisis struck. “The substantial jump in lending in March was significantly influenced by a late surge of activity to beat the government’s stamp duty change on second properties, which came into effect at the start of April,” said Mohammad Jamei, an economist at the CML. “The distortion caused by this stamp duty change appears to be larger than any previous stamp duty change we’ve seen.” The increased tax — known as a “stamp duty” — comes on top of higher sales tax rates introduced by the British government on expensive homes in December 2014. While the previous rise was on all transactions, the new surcharge applies to sales of both second homes and rental properties and means that a buyer of a £2 million property ($2.84 million) will pay £213,750 in stamp duty (about $303,000), compared with £153,750 previously ($218,000). Meanwhile, purchasing a £5 million home ($7.1 million) now carries an additional tax of £150,000 ($213,000); for a £10 million property ($14.2 million), the increase is £300,000 (about $425,000). Also see: Why Boston Is Becoming a World-Class Real Estate Market Demand is now expected to slump on the back of the new tax combined with uncertainty over the future of the U.K.’s membership of the European Union and the state of the global economy. The U.K. government is holding a referendum in June, which could lead to a so-called Brexit. “This is clearly a one-off event, and such volumes are unsustainable against a backdrop of economic uncertainty and the prospect of an increased regulatory environment for buy to let (rental) borrowing,” said Lucian Cook, head of residential research at Savills, the real estate consultancy. “We’d expect a significant fall in transaction levels in the second quarter of the year to offset the March activity, and for the stamp duty surcharge to act as a longer-term drag on housing transactions.”