The Budget contained extensive measures to both raise Stamp Duty receipts and counteract Stamp Duty avoidance within the £2 million+ markets.
They included an immediate rise in the standard rate of stamp duty to 7% and a 15% SDLT charge where properties are bought by "non natural persons” that include special purpose corporate vehicles.
It also included proposals, subject to consultation, for an annual levy where £2 million+ properties are held in non natural ownership and a capital gains tax charge when properties are sold out of an offshore corporate structure.
The 15% charge and prospective annual levy are likely to result in the biggest changes to the way in which purchases are structured.
Central London is most likely to be directly affected. Land Registry sales indicate that 40% of £2 million+ sales in England and Wales occur within the boroughs and Kensington & Chelsea and Westminster and the use of corporate ownership vehicles is by far the most common in this market.
Together these two measures are likely to curtail purchases of property by such vehicles, though where structures already exist the position is much less clear.
Our view is that the application of a 7% SDLT charge in an increased number of circumstances is unlikely to significantly unsettle the market. An increase of between 2% is not considerable in the context of recent price movements.
Equally, the fundamental demand drivers of London as a global city were boosted by other measures in the Budget, such as lower
rates of corporation tax, which significantly improve London’s
global competitiveness.
There is little doubt that these measures are likely to present challenges to a smooth recovery in the Prime Central London markets.
Supported by early evidence in the market, however, we believe
they will not undermine market demand or bring a large amount of new stock to the market to the extent that they cause sudden deep price falls.
It is common for the prime central London markets to go through lulls in this stage of a market cycle and we believe that this is likely to be a catalyst for a period of relatively static prices, in line with our existing published forecasts.
.jpg)