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Stamp duty: the pin the London property market has been waiting for
Something has to burst the London property bubble, says Merryn Somerset Webb. It looks like stamp duty could be it.
Flats in Battersea Power Station aren't looking so hot
We've often written about just how much changing tax regimes changes markets. And thanks to the utter inability of our government to ever let anything be, at the moment we have rather too many examples to look at than we would like. One of the most obvious is the London property market.
Looking for the pin that might pop the bubble is a pretty popular hobby (most Moneyweek staff indulge in it in one way or another). Tax might be it. It has now been 11 months since George Osborne put up stamp duty on pricey houses in the UK. The results are stark.
A Knight Frank blog on the matter notes that the usually "active" autumn has been nastily quiet. New buyer numbers are down by 30%. Exchanges are down 17%. Knight Frank has revised down its prime central London (PCL) price forecast for 2016 from 4.5% to 2%. 35% of PCL houses on the market have now had their prices cut.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
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Stamp duty isn't the only reason the market is suffering foreign buyers are put off by the strong pound (London is no longer offering much value for those paying in, say, roubles) for example. But every bubble needs a pin. And it looks like stamp duty might be London's pin.
A £1.5m flat in Battersea Power Station looks pretty stupidly expensive even at first glance. But once you take into account the fact that it would have to rise in value by over 6% just to offset the £93,750 in stamp duty and get you out evens, it looks like a really lousy deal. More on this from my colleague Dominic Frisby.
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