Almost two years on from the heavily debated 2015 Autumn statement where George Osborne announced changes to stamp duty, the effects are still being felt.
The announcement caused serious discussion amongst the media and key figures in the property market. If you are unaware of what exactly stamp duty is, it is a form of land tax. This tax is levied upon properties valued over a certain amount. Following the changes, according to the HMRC website, “the current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.” Crucially, anyone who purchases additional residential property, whether that be second homes or buy-to-lets, has to pay an extra 3% stamp duty.
Subsequently, prospective buyers rushed to make purchases in order to avoid paying extra stamp duty. This lead to an artificial spike in the number of property transactions. In turn, this created a false picture of the situation, making it difficult to asses the true impact of the introduction of stamp duty. However, what is clear is that increasing stamp duty decreased the number of property transactions. Making the issue worse, was that following the changes there has been a decrease in government revenue. Economist Arthur Laffer explained there was a point where increasing tax rate beyond a certain point becomes counterproductive, and what is clear is that George Osborne’s took stamp duty to that point.
This has led to extreme criticism of the government. Ed Mead, from Property Industry Eye, claimed that the Government’s decision demonstrated “complete ignorance”. Further claiming that the move has done serious damage to the property industry. Given what has occurred, the criticism from property experts is entirely justified; the number of properties sold has fallen. Whilst the tax has not achieved its stated purpose of increasing government revenue. Surprisingly, however, a recent investigation conducted by LonRes has yielded some encouragement. Their investigation revealed that sales in the prime central London residential market increased by 3% in the first half of 2017 compared to the same period in 2016.
There has been no inclination that the Government will reverse this change, so we can only hope that the market can adapt to the changes and that market sales continue to grow.
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