The Chancellor's decision to propose a new 7% Stamp Duty threshold on properties worth two million pounds or more has proved to be a controversial one.
The proposals, which came into effect on the day of the Budget, provoked a mixed, although largely negative reaction from commentators, many of them with more than half an eye on how it will affect their businesses.
"Let me make this absolutely clear to people," the Chancellor said during Wednesday's speech. "If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of Parliament."
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Yet, despite the Chancellor's conviction that this move will send a clear signal, many have already labelled the move as disproportionate, ineffective and inappropriate.
"A 7% stamp duty level would hit Londoners hard," said Sue Foxley, Head of Research at Cluttons, a property consultant and estate agent.
"There is a massive shortage of family homes in London's villages and given price growth expectation, growing demand will push average three and four bedroom family homes in many areas such as Islington into the top stamp duty tier within a year or two, making it even harder for families to commit to staying in the city."
Notably, four out of five properties that fit the £2m and above bracket in the UK are in London and the South East, suggesting that these regions will be hit disproportionately hard.
The move has also been criticised for the risk it poses to the rest of the sales market.
David Whittaker, Managing Director of Mortgages For Business, believes that, "as proposals go, this will do as much for the property market as the guillotine did for the pockets of Marie Antoinette's wig maker. All it will do is leave buyers in the middle of the ladder sandwiched between the feeble first-time buyer market and a punished prime market. Not a situation we should intentionally be in when the market is in middle of a lacklustre recovery."
David Newnes, director of LSL Property Services, agrees. "The Chancellor has plumped for stamp duty as his favoured means of generating revenue to pay for cuts in income tax and this puts a heavy burden on the property sector. Both the bottom and top ends of the market will be subdued by the increases in stamp duty and this is likely to cause activity to ease down in these parts of the market."
On the other hand, Richard Sexton, business development director at chartered accountants e.surv, points out that an extra £40,000 of stamp duty tax is just "an annoying inconvenience for wealthier buyers", rather than a "serious repellent".
"The effect on the overall housing market will be nominal given how few people the tax effects," he said. "Less than 1% of all house purchase approvals in 2011 were for properties worth over £2m, so the effects are unlikely to be widely felt and won't feed down into the lower echelons of the housing market, and the suggestion it will make skilled workers and wealthy think twice about moving to London seem farcical given these groups will be paying 5% less in income tax."
Stuart Law, Chief Executive of property investment firm Assetz, feels that it is hard to argue against a higher stamp duty tax rate for £2m plus homes, in times of "great austerity such as these".
He believes that while it will amount to "a tax on Londoners", the London market can "take the hit and will continue on its upward path regardless".
However, Nicholas Leeming, business development director at property listings web-site Zoopla.co.uk, feels that the new duty is "flawed and misguided", and points to Zoopla's own research which shows that the new rate will generate just £634m, compared to the £1.5bn promised by the government.
"We're likely see a slump in activity from buyers at the top level and this will have a knock-on effect all the way down the chain, and whilst the government has stated that it wishes to crack down on stamp duty avoidance schemes, this new rate is only likely to encourage the wealthy to find even more ways to avoid paying it. Unfortunately, the economics of this hike don't measure up to the populist moves behind it."
NR
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