Top agents out-perform peak of market in stamp duty rush

An extraordinary rush to beat the stamp duty deadline for millionaires has pumped billions of pounds into the property industry.

One property in Mayfair sold for £27m, with the purchaser reluctant to hand over 5% tax to the Treasury when 4% would do.

Winkworth reported that it exchanged and completed on two expensive properties in one day, Marsh & Parsons completed swiftly on a £6m house on Tuesday, and Foxtons simultaneously exchanged and completed on ten prime central London houses in the same 24 hours before the deadline.

In the same 24 hours, Savills completed on £90m worth of property as the deadline closed in. One-third of it was in south-west London.
 
Wednesday was the day that new stamp duty came in, adding 1% in tax for buyers of properties priced at £1m and above. In the week leading up to it, Savills completed on £200m of property in total.

This was after a record March which saw ‘furious activity’, and in which Savills’ prime London sales beat its sales at the peak of the market back in July 2007 “by a significant margin”. Deals went through quickly.

But Jonathan Hewlett, head of Savills London, suggested the party is not yet over.

He said: “The most important element to this tale, we believe, is the pipeline of deals still coming through which remain very strong.   

“Importantly, the number of properties under offer at the end of the month are well ahead of March 2007 when the market was building towards its peak, suggesting that this is not a blip but a reflection of the strength of London’s prime market.
 
“While this deadline focused minds and made a difference to the speed of transactions at all pricing levels, our pipeline of agreed deals is ahead of the March 2007 level.

“Our sense is that this momentum could continue and that there will be price inflation for the right stock.”

The most up-market parts of London were beneficiaries of the Stamp Duty race. In Fulham, Savills pushed through £12m of property sales in the week before the deadline, but also agreed nine sales that had no chance of meeting the deadline, and has since agreed two more.
 
Savills’ branch in Sloane Street agreed 14 sales to the total value of £94m in March, a record month for the office since June 2007.

In Knightsbridge, Savills’ Charlie Bubear, who specialises in flat sales, completed on ten deals in the last week, including three which only went under offer on Monday.

A Savills spokeswoman said: “To achieve such tight sales, tactics such as attended exhange and completion are used, and in some cases the seller secures a leaseback to allow for a move after the completion date. Charlie has even been helping clients clear flats to allow them to complete, mopping floors and carrying potted plants out of gardens.”

Not to be outdone, Knight Frank completed on £333m of transactions in the three weeks leading up to April 5, compared with £74m in the same period of 2010. 

Liam Bailey, head of residential research at Knight Frank, said: “This 350% increase is reflective of the huge rush to transact prior to the introduction of the new 5% £1m-plus stamp duty rate.”

Whilst some of the streets of London were paved with gold, the leafiest lanes in the shires were also awash with rich buyers.

Rupert Sweeting, head of the country department at Knight Frank,said: “We saw an unprecedented rise in the number of exchanges and completions, which was solely down to buyers keen to avoid paying an extra 1% in stamp duty. This is entirely understandable, as on a £3m purchase a buyer saves £30,000.

“We even had buyers completing before April 5 and, under a rental / licence agreement, the vendors were allowed to stay living in the property to give them time to find a new house. In one case, this period is a year.”

Like Savills, Knight Frank believe that the passing of the deadline will not deter the wealthy – but Sweeting warned that tax avoidance schemes would become more popular.

Sweeting said: “Going forward, buyers have accepted that, in the grand scheme, it is an amount that they can and will swallow.

“It would have caused a lot more distress had the £1m stamp duty been bumped up by 3% or more. Given the stamp duty on a £3m home purchase is now £150,000, I imagine that stamp duty avoidance schemes will become more popular, as buyers try to avoid paying such a significant amount to the government.”

David King, director of Winkworth’s country house department, said: “The stamp duty increase generated a significant amount of activity in the weeks leading up to April 6. There was a rush to complete this week alone, with two cases of exchange and completion on the same day.”

The rise in stamp duty is likely to cost £1m-plus buyers an extra £17,112 on average, according to Zoopla. The average stamp duty paid on £1m-plus properties last year was £68,449 but the increased stamp duty will take average duty to £85,561.

In 2010, there were 6,610 property transactions conducted in Britain at a value over £1m.