Hello, you’ve reached the Experience Invest blog, where we make it our mission to bring you all the latest UK property news. New figures have shown us that changes in stamp duty rates led to a fall in ‘super prime’ London property sales last year.
Under UK law, you must pay a tax called ‘stamp duty’ if you buy a property or land over a certain price threshold in England. New stamp duty rates came into effect in December 2014. At present you must pay the tax on residential properties worth at least £125,000 and on non-residential land and properties worth a minimum of £150,000.
Property Wire reports that a new study from UK property agent Knight Frank has shown that the change in stamp duty rate led to a fall in super prime London property sales in 2015. Knight Frank defined ‘super prime’ property as units worth at least £10 million and the sale of these properties in London dropped by a third last year.
Super prime sales
According to Knight Frank, the stamp duty changes increased the transaction tax on a £10 million property from £700,000 to £1.1 million – a rise of 4%. Consequently, the number of super prime transactions completed by Knight Frank fell by 14% over the same period as the stamp duty increased.
Meanwhile, the report found that price growth in London’s super prime property market remains subdued, following a pronounced slowdown in recent years. Average super prime property prices in the UK capital expanded by 0.5% in the year to December 2015. But Knight Frank noted that a third of all new builds in London last year were for projects worth more than £10 million – up from a fifth in 2012.
Absorbing the shock
Explaining these figures, Knight Frank suggested that vendors are now beginning to factor higher transaction costs into purchasing decisions, potentially resulting in the annual decline. This was exacerbated by a series of super prime London property deals completed just before the new stamp duty rates came into effect.
The report argued that there are signs that the London super prime property market has started to absorb changes to stamp duty rates. Asking prices are increasingly coming to reflect demand in the current market and this has prompted buyers who view the market as flat to act, even if they’re remaining cautious. Knight Frank added that 2014’s change to stamp duty is likely to be followed up with a three point stamp duty rise on buy-to-let properties and second homes in April 2016.
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