The 2012 budget revealed by Chancellor George Osborne contained relatively little that would affect the housing or property market, because this was all covered in an earlier housing strategy document. However, one change in the budget has got the property industry's back-up, specifically the high end property market.
For the last 2 years the UK housing market has constantly been somewhere between bouncing and bobbling and struggling and wobbling, but the prime Central London residential market has been in a constant state of growth since mid-2009 and is currently in a "very strong upturn" according to Liam Bailey, head of residential research for Knight Frank. Prime London property prices are now 40pc higher than in 2009, thanks in no small part to a massive influx of foreign buyers.
Many of the foreigners buy through "offshore vehicles" and so pay just 0.5pc stamp duty, and this is what the Chancellor wants to stop. The budget introduced a new 15pc rate of stamp duty for residential properties over £2m bought by "certain non-natural persons". The chancellor also said he would consult over applying an annual tax of up to £140,000 on the corporate vehicles owning properties and capital gains tax on the sale of shares in the vehicles.
That section of the industry is up in arms over the announcement. The Prime London market has gone into "meltdown" according to upmarket estate agent Douglas & Gordon. The government has turned to "property bashing" from banker bashing according to Nick Candy, developer of the prestigious and controversially pricey One Hyde Park development.
Agents at Jackson-Stops & Staff said a Far Eastern investor had pulled out of a major residential deal on the day of the Budget, and Savills reported a rush of vendors trying to exchange on deals before the rules came into effect at midnight.
Meanwhile the aforementioned Liam Bailey believes the rules are unjustified as tax dodging is not the main reason for buying through such vehicles. "Whereas tax may in some cases be the reason for the adoption of these structures, for many wealthy buyers it is privacy which is the main benefit from using this ownership route," he said.
- Friday 23 March 2012