Property sales in the UK slumped 53% after Chancellor George Osbourne hiked the stamp duty from 5% to 7% for homes valued at more than £2 million in March 2012, and these property tax changes have dented prime property prices in London, as international investors spurn away from London property market.
Although the number of homes changing hands dropped 9% in the quarter ending September 2012, prices increased 3.7% to a record high of an average £249,958. Estate agents London Central Portfolio claim that homes valued at £5 million or more are boosting the property market and propelling property prices to rise. Data supporting the statement shows 60 sales of super prime homes in the quarter, up 88% compared with the same period 12 months ago.
Estate agents are finding it hard to sell homes that cost below £5 million. A spokesman from the firm said, “The drop in house sales in prime central London almost definitely comes from the negative response to the tax changes announced in the budget. Besides putting up stamp duty to 7% for individuals buying residential property worth more than £2 million, the rate also jumped to 15% for companies.”
The spokesman also said that the government is likely to introduce a mansion tax of up to £140,000 a year on homes held by these real estate companies as well as levying a new capital gains tax on their disposal. This action was aimed at Central London, where more than three-quarters of homes valued at £2 million or more are located.
London Central Portfolio says that private property rental sector is yet to feel the full impact of the property tax changes. As the government has made capital less attractive for overseas investors, the firm says that it expects a 10% decline in the rental sector.