James Morton, Director of London Estate Agent, Benham & Reeves, believes that excessive stamp duty is hampering the London property market and has joined calls for the Chancellor to take drastic action in his Autumn Statement.
As a London estate agent, I’m not alone in my concerns about the unfair impact of property taxes on London homebuyers.
Extra Stamp Duty, introduced by George Osborne in December 2014, saw stamp duty increase for homes worth over £937,500. Tax on a £2 million home was increased by £50,000, whilst tax on a £5 million home increased by over £160,000.
As if this were not punitive enough, we then saw a 3 percent levy introduced on second homes in 2016.
These taxes are having a huge impact on the London property market.
The NAEA reported homes available to buy as being at their lowest level for the month of July since 2002. While the market will almost certainly be revitalised by a predicted September improvement, these trends can’t be ignored.
There are fewer entry level homes available and a Lloyds Bank study recently reported that 24% of buyers cited Stamp Duty as the largest factor preventing them from making their second step on the property ladder. Put bluntly, mid-range home-owners, who are not often wealthy, can’t afford to move.
Stamp Duty is increasingly punitive towards Londoners, where property prices are higher. A report in the Telegraph, conducted by estate agency haart, found that while the average salary in London is 24.6pc higher than the rest of the UK, London home buyers pay stamp duty which is 750pc higher than in the country as a whole.
Pressures for reform are mounting, both inside and outside the Property Market, as a shortage of entry level properties is making it harder across the market as a whole.
Tory leadership favourite Jacob Rees-Mogg has announced he would like to see the tax scrapped, however doing so could be viewed cynically by a weary UK wide electorate. Many who live in cheaper areas view Stamp Duty as ‘a charge that only wealthy people pay anyway’.
The problem is that it isn’t only wealthy people that buy homes in London – and exorbitant Stamp Duty rates, which ignore the income of the Buyer, often means only the wealthy can afford to move easily – to me that’s entirely illogical! It’s not even like the City directly benefits from these taxes – hard-working Londoners have had enough.
Mayor Sadiq Khan recently disclosed research showing 40% of nurses and young teachers in London were expected to leave within the next five years because of high housing costs. London needs these skilled professionals – do we really expect them to choose between travelling in from cheaper areas, or relocating altogether? Huge stamp duty fees are often the final nail in the coffin for public servants who are already struggling to live close to work.
The Guardian reported this week that Sadiq Khan has asked the Treasury to hand over control over the proceeds of London property taxes. Tony Travers, a director of LSE London, went further, saying that London should also be able to set their own Stamp Duty rates according to local circumstances rather than have to impose Nationally set rates.
While that would be a good interim solution, I’d question whether Stamp Duty plays any worthwhile role at all. Put simply, there is no logic to taxing people just because they want to move house. The whole property taxation issue, including outdated Council Tax, needs an overhaul.
I’m not going to evaluate the alternatives. Many within our industry have done this already. All of the research suggests that a new system would see those who can afford to paying more, not less – which should reassure the electorate. Stamp Duty is plainly unfair, ignores income altogether and can effectively imprison a growing family in a home that no longer meets their needs.
Like many of other London estate agents, I’m calling upon the Chancellor to revitalise the property market by scrapping Stamp Duty in his Autumn Statement. It’s the sensible decision that Londoners urgently need.