The introduction of a 7 per cent stamp duty rate for £2m-plus homes is likely to mean sellers have to cut asking prices to achieve a sale, agents have warned.
Sellers have already started to drop their asking prices to below £2m, while some deals have fallen through as a result of the 2 per cent increase in stamp duty land tax (SDLT).
George Osborne’s Budget announcement that properties worth £2m or more would be hit with a higher stamp duty rate from Thursday came just a year after a new 5 per cent rate was introduced for homes valued at £1m-plus.
This new, higher duty will see the tax paid on a £2m house increase from £100,000 to £140,000.
Estate agents said that properties valued at around the new £2m stamp duty threshold would see their prices fall as many buyers will be unwilling to pay the additional tax.
“There has to be an element of price adjustment, and we would expect tough negotiations around the £2m level,” said Liam Bailey of Knight Frank.
According to Mark Pollack of Aston Chase, the London-based estate agent, within an hour of the chancellor’s announcement he had lost a £10m-plus sale, and had two English buyers seeking to renegotiate their buying prices downwards by the amount of the additional taxation.
Meanwhile, Martin Bikhit of Kay and Co, another London-based agent, said an offer on a £4.25m property was withdrawn on Wednesday after the buyer realised he would have to pay an additional £99,000 in SDLT.
Experts warned that the Budget measure could also see the supply of new property coming on to the market fall, as more homeowners look to stay in their properties for longer, instead of paying the higher tax when they move.
Many wealthy homebuyers rushed to bring forward their property exchanges on Wednesday to avoid the higher rate. Buyers and sellers had until midnight on Wednesday to exchange contracts and pay the old rate of 5 per cent.
Two of the largest high-end agents said about £170m-worth of £2m-plus property deals were rushed through, approximately 50 transactions.
Knight Frank said 23 clients brought forward exchanges in the hours after the Budget announcement, amounting to £107m worth of property transactions. This was more than six times the value exchanged on the same day in 2011, when £15m worth of contracts were exchanged.
Savills, the high-end agent, said its clients had accelerated exchanges on more than £50m worth of property in London, and £20m in the Home Counties, after the Budget announcement.
“It is not every day the chancellor increases the tax on your property transaction by 40 per cent, so it was hardly surprising that [we] saw a flurry of activity on Wednesday,” said Liam Bailey of Knight Frank.
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