Britain’s luxury property industry had their hopes dashed Wednesday that the government would reverse sales tax hikes that have been stifling activity at the top end of the country’s housing market.
Industry leaders had hoped that new finance minister Philip Hammond would reverse his predecessor’s move in December 2014 to introduce higher stamp duty rates on those buying homes worth around more than £1 million (US$1.24 million).
The higher rates meant that the tax for a £6 million property, for example, jumped from £420,000 to £633,750, dampening demand at the top end of the market, especially in prime central London.
However, Mr. Hammond, also referred to as the chancellor, made no mention of a possible reversal when introducing this year’s Autumn Statement (one of two annual updates of the government’s plans for the economy, including tax) to Parliament.
This is despite figures from economic consultancy Oxford Economics showing that the government received only half of what it expected in stamp duty tax receipts from £1 million-plus home sale last year as the reform led to 1,950 fewer sales in this price bracket.
What’s more, figures that accompanied the Autumn Statement showed that the government’s independent forecasters are predicting 230,000 fewer sales across the whole market over the next five years than they were expecting in March.
“In bypassing stamp duty revisions in the Autumn Statement, the chancellor has missed a prime opportunity to revive the top end of the market, not least because current inactivity can be traced back to the reforms of 2014,” said Rory O’Neill, head of residential at Carter Jonas, a brokerage, said in a statement.
“Stamp duty is the only negative stalling the market—even the attractiveness of the pound to dollar-based buyers, affordable borrowing and pent up demand cannot overcome the crippling transactional costs of moving house.”
Liam Bailey, global head of research at Knight Frank, added that the absence of new announcements on property taxation today “suggest the new chancellor wants to let existing reforms bed in before opening them up for review”. He stressed, however, that the “issue of falling market activity is set to become a larger issue and will need addressing”.
Mr. Hammond also made no mention of reversing a 3% stamp duty surcharge that was placed on buyers of second homes and rental properties worth more than £40,000.
“It is disappointing the chancellor did not take this opportunity to correct the stamp duty woes in the second home market,” said Robin Paterson, joint chairman and chief executive of United Kingdom Sotheby’s International Realty.
“Whilst some correction to pricing was needed, these corrections have certainly taken place and a kick start to the middle- and high-end London market is now necessary.”
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