Tax changes flagged up in this year’s Budget and likely to be confirmed next month have taken an exacting toll of the top end of the housing market, says a buying agent.
Roarie Scarisbrick, partner at Property Vision, said that transactions in prime central London dropped 50% this summer.
This was after the Budget imposed VAT rises on £2m-plus houses and warned of tax penalties on properties in this price bracket owned by ‘non-natural persons’ – for example, companies and trusts.
He said: “It has been a roller-coaster in the prime central London markets this year. We started the year on a run, with the momentum being carried through from last year, and there were transactions throughout the market.
“The energy carried through to the spring, when the Chancellor delivered his attack on high-value property. The Budget didn’t kill the market, but it did take the wind out of its sails, especially in the most international areas, which were most affected.
“Buyers took the Stamp Duty hike on the nose – it was an irritation rather than a deal breaker. You don’t however want to try and sell a house for just over the £2m threshold, though, where that extra 2% is a major barrier. The only part of the market left unscathed was below the £2m threshold, which has not skipped a beat.
“The summer was the quietest we have seen in years. We monitored volume of trade in the prime postcodes through the summer and recorded a 50% drop against the same period last year.”
He went on: “There is still a great deal of uncertainty concerning the meaning and implications of the notorious Budget, and the draft legislation is due to be published imminently.
“There is no unanimous opinion on the implications for the market, but it is clear that accountants, tax advisers and lawyers will profit richly as people scramble to restructure before a deadline, which may be as early as April.”
The buying agency also said that the country house market has been suffering.
Property Vision partner Philip Harvey said: “A number of properties that failed to sell in autumn 2011 and summer 2012 have now sold as prices have been reduced; realistically this appears to be around 15-20% below prices at the peak in most cases.
“Some buyers have been paralysed by fear, and until a number of sales have been made, they have been cautious about committing to the purchase of a property. A real concern on the other side of the fence is that currently achievable prices will not induce vendors to come to market.
“What everyone needs to realise, but particularly vendors, is that the country property market has fundamentally changed as a result of the economic climate. Although a number of home owners are holding out for the spring market, realistically it is impossible to guess how long it will be before we see any real signs of price recovery.
“Until we have greater clarity on the economic outlook it is unlikely that there will be any dramatic change in the country property market, with little motivation for people to buy or sell. There is a school of thought that the arbitrage between the London and the country market will attract buyers looking to sell up in London.
“The reality is that whilst job security remains low, most employees will want remain in London to be closer to their desks.”
Property Vision also reported that in the West Country, demand for second homes has hit an all-time low, with prices for second homes down by up to 25% since peak.
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