How stamp duty changes are distorting London's property market

Changes to stamp duty are driving London property developers to give up on family homes in favour of filling the capital with tiny flats.


London property developers are building fewer famliy homes

Tax what you want less of; don't tax what you want more of. It's simple stuff. So here's a question: why do the authorities want fewer family size homes in London and more rabbit-hutch sized homes? That's the direct result of the recent rise in stamp duty.

The Times reports today that property developers across London are cutting the size of the apartments they are building. The group developing New Scotland Yard in central London are, for example, planning to increase the number of flats they end up with from 268 to 295 by cutting the number with three bedrooms and increasing the number with one bedroom.

The group doing Battersea Power Station has already announced something similar: it is adding 409 homes to its total by cutting the size of the ones in the original plans. The same is true in Chelsea where one developer has just cut seven townhouses and a six-bedroom flat from its plans so it can bump up its mini-flat count.

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It all makes perfect sense (paying stamp duty at 10% on any purchases of more than £925,000 is one hell of a deterrent to the average buyer). But it is worth wondering if, when George Osborne introduced his changes, he had actually thought through the effect of the new rates on the make-up of London's new-build housing stock, given that the average UK new build is already rather smaller than those anywhere else in Europe. I suspect not.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.