"Most Londoners are unlikely to weep for wealthy second home buyers, but the reality is that without movement at the top, the middle and lower end of the chain are being blighted by a shortage of available properties"
He says that house prices at the top of the London property market have been "hammered" by George Osborne’s stamp duty reforms, with the west London enclaves of Kensington and Notting Hill – the former Chancellor’s home – seeing the biggest price drops.
West Kensington saw prices drop by 12.3% between Q2 2015 and Q2 2016, knocking over £160,000 off the value of the average home in the area. A second home property at the same price would now cost £133,800, an increase of £60,700 or 83%.
Analysis of data before and after the reforms were introduced by London estate agent Stirling Ackroyd reveals the top 25% of the capital’s properties have seen their house prices drop by -5.4% since Q2 2015.
Stirling Ackroyd believes that stamp duty, rather than Brexit, is holding back the top end of the London property market.
It adds that although the government’s reforms cut the cost of stamp duty for properties valued at less than £1,125,000, the slowdown in the market at the top end has contributed to a lack of supply in the middle of the market, causing price increases for the majority of London buyers.
Additional research from Yorkshire Building Society shows that almost two in three aspiring homeowners would be more likely to buy if they didn’t have to pay stamp duty.
YBS is calling for the Government to consider making stamp duty a seller’s tax rather than a buyer’s tax to reduce initial cost of buying property and make it easier for those moving up the ladder.
The Yorkshire estimates such a reform would save first-time buyers in the UK excluding Scotland an average of £3,791, with Londoners saving the most at an average of £13,171.
Nick Davies, Head of Residential Development at Stirling Ackroyd, commented: “Targeting top end buyers of properties valued at over £1 million might have been good politics at the time, but the policy is crippling Prime Central London, with potentially damaging consequences for the capital’s property market down the road.
"Most Londoners are unlikely to weep for wealthy second home buyers, but the reality is that without movement at the top, the middle and lower end of the chain are being blighted by a shortage of available properties, leading to intense competition and spiralling prices. Higher income families are holding on to their homes rather than move up, while buy to let investors have all but disappeared, which in time will have a similar effect on the rental market.
"Domestic buyers remain worried about whether values at the top end of the market will hold up, and the huge cost of extra stamp duty is only serving to put would-be buyers off. It is also crystal clear that the decline at the top end of the market is nothing to do with Brexit – the big drop in prices is entirely the making of the government.
"With the new Chancellor Philip Hammond busy working on his Autumn Statement, the government should take the opportunity to think again on the stamp duty surcharge, and should also look at cutting the cost of stamp duty across the board as the tax serves only as a disincentive to moving home.”
Andrew McPhillips, Chief Economist at Yorkshire Building Society, added: “Saving enough to pay stamp duty adds to the overall difficulty of buying a home. It is hard enough for buyers to find the right property in the right location without the need to pay additional fees and taxes, given the scale of house price inflation in recent years.
“The Government’s Housing White Paper will rightly outline plans to resolve the crisis faced by those unable to buy a home. But these will be long-term ambitions and measures to ease the problems in the short-term, including reforming stamp duty, should form part of the Government’s strategy."
