London on strict diet to healthier, more balanced market
17 February 2016
Those buying a second home or investment property may be keen to complete before 1 April to avoid paying an extra 3 percentage points on each tier in stamp duty. However, there is still plenty of uncertainty surrounding the new rules; even though the consultation period has ended, we are still awaiting the outcome. It is therefore essential that those keen to proceed take tax advice before committing to any purchase.
It is clear to see why investors and second homebuyers are keen to buy before 1 April. The extra 3 percentage points means a buyer of a £1.5m property will see their stamp duty bill increase by £45,000 (the difference between £93,750 under the current regime and £138,750 from April). Move up the price scale and the difference is even more marked – an extra £75,000 on properties costing £2.5m (from £213,750 to £288,750) and an extra £150,000 on properties costing £5m (from £513,750 to £663,750).
Subsequently, we firmly believe that unlike last year, the property market in 2016 will be front-loaded. We have seen continued growth in activity in London in what is usually one of the quietest times of the year. It is quite clear that something is propelling the market to some degree of action.
The capital flight to London continues in a knee-jerk reaction to some of the fundamental concerns across the world. There has long been a need for greater balance in the marketplace and George Osborne may feel that he is assisting with this via recent tax changes as far as overseas investors, second homeowners and landlords is concerned, creating a more level playing field for first-time buyers.
Broadly, such moves are positive. Something has to be done when Londoners are being priced out of their own city. London will not continue to grow inexorably unless people at the bottom are able to get a foothold in the market.
The UK is often viewed as a one-city state in London, which is a very detrimental and unfair assessment. If overseas investors pause and take a breath on London, then that has to be a good thing. Otherwise London is in danger of choking itself by becoming a victim of its’ own success. The population cannot keep on growing at the rate it is because the infrastructure can’t cope.
There are definite opportunities for those buyers who are in the market for the long haul and are committed for the long term. We are entering a new era where people move home much less regularly, as the cost of moving is such that homeowners need significant price inflation to cover it. Those who are coming to market are much more qualified, more needs based than usual and buying for the longer term. This all makes for a considerably healthier marketplace, giving buyers more time to consider their options, and with noticeably fewer speculators for competition.