Last year’s hikes in Stamp Duty have hit the London sales market by reducing volumes 15%, Knight Frank said this morning.
The new 7% rate introduced with immediate effect in the 2012 Budget for properties over £2m was forecast by HMRC to bring in another £150m.
However, Knight Frank estimate that by the end of March, HMRC will have collected £73m more than forecast.
While sales volumes have fallen, the agent says house prices in central London have shot up 8.4%.
During the six months following last year’s Budget the impact was dramatic for London estate agents, with the volume of £2m-plus sales falling by between 25% and 35% across London.
Knight Frank says the market has since reacted more positively following the publication of the draft 2013 Finance Bill in December, which provided some clarity around wider tax issues for owners of £2m-plus properties.
Knight Frank estimate that transactions over the last year in the £2m-plus residential property sector will be around 3,400, a drop from 4,000 a year earlier.
At the lower end of the prime market, meanwhile, sales of £1-2m homes are likely to have increased by around 5% over the same period.
Taking this into account, Knight Frank calculates that by the end of March, HMRC will have collected some £223m in additional tax revenue since the 40% rise in Stamp Duty was implemented.
Knight Frank said it believes the longer term impact of the Stamp Duty increase will be to reduce total £2m-plus sales by around 10% below the level they would otherwise be at.
Meanwhile, Cluttons has reported that the number of cash purchases in central London has plummeted after bonuses were slashed.
According to Cluttons, cash buyers had been nearly three-quarters of the market in 2011, but the proportion of mortgaged buyers rose from 25.8% in 2011 to 51.8% last year.
Cluttons says the trend is likely to increase, with further clampdowns on bonuses.
Cluttons also said that Eurozone worries have abated, meaning that investors no longer feel so driven to plough their cash into the ‘safe haven’ of the London property market. Sue Foxley, head of research at Cluttons, said: “Banks are facing pressure from regulators, Government, shareholders and the public to clean up their act, which has resulted in a softening in the big bonus culture.
“The severely limited supply of property in the prime central London market means that this has had limited impact on prices to date, with overall demand remaining healthy.
“However, we are seeing a shift in the profile of buyers as first-time buyers and mortgaged households have stepped into the market.”
Cluttons predicts that prime central London will see a 4% increase in prices this year, followed by a further rise of approximately 4% per annum between 2014 and 2017.
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