Cal­cu­lat­ing win­ners and losers on Bud­get changes

Will the new stamp duty rate dampen the mar­ket for prop­er­ties over £2m or will buy­ers be happy to pay an­other £40,000-plus? Sharon Dale re­ports.

Yorkshire Post - Property - - FRONT PAGE -

WHEN the Bud­get bomb­shell re­vealed a new seven per cent rate of stamp duty for homes over £2m, An­drew Wil­liams barely bat­ted an eye­lid.

The pre­vi­ous top rate was five per cent on homes over £1m so the Chan­cel­lor ef­fec­tively added an­other £65,000 to the cost of buy­ing Mr Wil­liams’s beau­ti­ful Old Rec­tory in Brandsby, near York. The house is priced at £3.25m and un­der the old rules, stamp duty would have been £162,500. It will now be £227,500.

“Firstly, stamp duty doesn’t af­fect me be­cause I am not pay­ing it, the buyer is, and se­condly you have to put it in con­text. If some­one is rich enough to pay £3.25m then an­other £65,000 isn’t go­ing to make that much dif­fer­ence to them,” says Mr Wil­liams.

Fur­ther­more, he be­lieves that tax­ing the buy­ers of top prop­erty is a good way of in­creas­ing Gov­ern­ment rev­enue.

“The Gov­ern­ment, which­ever po­lit­i­cal party is in power, has to raise taxes and this isn’t a bad way of do­ing it. It af­fects rel­a­tively few peo­ple.”

Toby Mil­bank, of Strutt and Parker, Har­ro­gate, agrees that an­other two per cent won’t de­ter the wealthy, though the an­nounce­ment did cause a panic for one buyer.

“He was due to ex­change con­tracts with our client on Fri­day morn­ing. We checked the new rules and the stamp duty rise came into ef­fect at mid­night on Thurs­day. We man­aged to rush the ex­change through so he could save the two per cent.

“That was un­der­stand­able, but in gen­eral I can’t see the su­per rich and high net worth in­di­vid­u­als be­ing put off by the in­crease. An­other £40,000-plus sounds a lot but it isn’t to some peo­ple.

“It might be a dif­fer­ent story for some­one who has steadily climbed the lad­der and saved all their lives to fi­nally buy that big house and they’re stretch­ing them­selves with a big mort­gage. But, like most changes, we’ll get used to the new rate and it will be­come the norm. It’s like when in­ter­est rates rise. There’s a flurry of panic and then peo­ple ac­cept it and get on with life.”

What will cre­ate more pain for top-end buy­ers is the clam­p­down on prop­erty tax avoid­ance.

Those who put prop­er­ties into com­pa­nies will now face a new 15 per cent stamp duty. Some­one buy­ing a home worth more than £1m through an off­shore com­pany pre­vi­ously paid five per cent.

From April next year, com­pa­nies that own prop­er­ties worth more than £2m will face an an­nual levy, yet to be de­cided, and there will be cap­i­tal gains tax of 28 per cent when they sell.

Lu­cian Cook, di­rec­tor of Savills Re­search, says: “The an­ti­avoid­ance mea­sures are a triple whammy. An in­crease in stamp duty on cor­po­rate en­velopes should be enough of a de­ter­rent alone. The threat of both an an­nual levy and cap­i­tal gains tax on exit look like ag­gres­sive an­ti­avoid­ance that is ret­ro­spec­tive in na­ture and this could set alarm bells ring­ing.

“There are po­ten­tially two sav­ing graces: the an­nual charge is to be sub­ject to con­sul­ta­tion and won’t come in un­til next year and the same ap­plied to the cap­i­tal gains tax charge. There may well be a 12 month win­dow for own­ers to put their high-value houses in or­der.”

Lu­cian be­lieves the seven per cent rate and anti-avoid­ance mea­sures could sti­fle im­por­tant over­seas in­vest­ment. The in­crease to seven per cent takes London from the sev­enth to the fourth most ex­pen­sive city for pur­chase taxes. Paris, (6.5 per cent) Tokyo (5.3 per cent) and Hong Kong (5.3 per cent) are all cheaper. Sin­ga­pore has the high­est pur­chase tax at 13.1 per cent. In Syd­ney it is 11.5 per cent and in Mum­bai 10.6 per cent.

While the UK po­si­tion in the rank­ings could make over­seas in­vestors think twice, in York­shire the most im­me­di­ate con­cern is for sellers who have prop­erty on the mar­ket for just over £2m.

Ed­ward Hartshorne, of Blenkin and Co, York, says: “Houses that would once have sold for one hun­dred or two hun­dred thou­sand pounds over £2m are now very un­likely to sell at a price be­yond this new thresh­old. Un­like in London, the money in North York­shire is hard earned and peo­ple will un­der­stand­ably fight their corner for a fair deal.”

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