Estate agents, housing groups and homebuyers across Eastlondonlines boroughs have given mixed responses to George Osborne’s unexpected Stamp Duty reforms.
Some estate agents said the reductions in duty at the lower end of the market would make a “massive difference” for middle-income buyers, while housing campaigners warned that it would only fuel house price inflation.
As of last week, 91 per cent of property transactions in the capital will benefit from the cuts to stamp duty announced in the Autumn Statement last Wednesday.
The averagely priced London home at £510,000 will see a Stamp Duty reduction of £4,900, with tax falling from £20,400 to £15,500 under the new “marginal” rates.
While buyers at the bottom of the market will profit from the revised rates, homes over £937,500 will experience a dramatic rise in tax. Property worth more than £5 million will see a stamp duty rise of as much as £163,750.
According to the chief executive of property specialist London Central Portfolio, Naomi Heaton, while the number of property transactions above £937,500 affects one in 50 households in the UK, this figure increases to one in 20 in greater London. In central London one in two properties are sold at more than £1 million.
Stamp Duty rises on property over £937,500 will impact ELL boroughs with 161 properties in Hackney sold over this figure in 2014, 145 in Tower Hamlets, 55 in Lewisham and 16 in Croydon, according to Land Registry figures.
House prices in Hackney have increased by £96,315 in the last year, according to the National Housing Federation, making its property price rise to the fifth highest in London. Tower Hamlets experienced the 14th highest rise in house prices, which rose by £61,485.
Vicky Bibiris, sales director at Location Location estate agency in Stoke Newington, Hackney, said: “The new reforms will help to move the middle of the market, allowing people to save thousands. These savings will make a massive difference for buyers, particularly as stamp duty isn’t part of people’s mortgage and they must have cash available to pay it.”
“However, buyers trying to negotiate the higher end of the market have been penalised. Buying in an area like Hackney, professionals can afford properties at the higher end of the market with a mortgage, but may not have the cash funds to fulfil stamp duty requirements. It’s not really fair that they now have to spend 10 to 15 per cent more in order to get a home.”
Bibiris added: “It’s inevitable that prices at the lower end of the market will rise… studio and one bed flats valued around the £250,000 mark will probably go up to around £275,000 and £300,000 as the savings buyers are making in stamp duty will go towards the value.”
She added that because these higher house prices could be covered by a mortgage rather than by ready cash, which is needed to pay stamp duty, buyers would still be better off.
George Liney, sales and lettings negotiator at Rocodells estate agents in Crofton Park, Lewisham, said: “I don’t think [the reforms] will have too much impact on house prices in Lewisham. Values will rise anyway, particularly on larger properties, however this will not be as rapid as it has been previously.”
David Bright, co-owner of David Bright estate agents in Croydon, said: “The new reforms will certainly encourage an increase in transactions due to the savings at the lower end of the market. It has been suggested that transactions in high value properties will suffer, but we are still unsure as to whether there will be a collapse.”
Housing campaign groups highlighted the risk that the tax reforms will pose on house price inflation. Duncan Stott, director of PricedOut, a campaign group for affordable house prices, said: “There is a real risk that [the] stamp duty changes will just end up inflating house prices.”
“A house sold at the current average price… will now be liable for £4,540 less stamp duty, but since sellers want to maximise the sale price of their property, they will expect buyers to pay this money for the house instead”.
Damian Griffiths from Lewisham People Before Profit said: “The increased pressure of the market created by this reform will most likely lead to no long term reduction, or even an increase in house prices. The vendor and estate agents will benefit, because they will end up pocketing the tax that would have otherwise have been paid to the government.”
“This measure is typical of the coalition in being aimed at stimulating the market and a political ploy to woo potential supporters away from UKIP. It does not attempt to address the problem of the lack of affordable housing in places like Lewisham.”
Bright agreed with these fears, saying: “Undoubtedly prices will go up, the reform was definitely a pre-election boost, although I don’t think any of us thought it would come in the form of stamp duty.” However, he said the reforms “will definitely be beneficial.”
Renters campaign group Generation Rent raised concerns over the effect lower stamp duty thresholds will have on the number of buy-to-let landlords in London.
Spokesperson Dan Wilson Craw said: “While reform was needed… Renters will continue to stretch themselves to keep a roof over their heads and may find themselves paying even higher rents as stamp duty reform spurs buy-to-let landlords into acquiring more properties.”
Estate agents agreed with Craw. Bright said: “The reforms are good for buy-to-let landlords… it is a strong industry and a good alternative to a pension plan for some people. Croydon is attracting a lot of investment at the moment, a great place to invest is West Croydon for 10 or 20 years in the future.”
Bibiris also echoed this forecast: “I do see a potential surge in buy-to-let landlords, it is already easier for them as they are not as vigorously checked when applying for a mortgage and so the tax saving will be an extra bonus.”
Osborne’s proposals were also criticised for failing to fully address London’s current housing crisis.
David Orr, chief of the National Housing Federation said: “The Chancellor’s announcement won’t help people trapped paying high rents and stranded on social housing waiting lists… we now need bold and urgent action to end the housing crisis within a generation.”
Damien Egan, Lewisham’s cabinet member for housing, said: “We mustn’t forget that thousands of people are locked out of buying a home in Lewisham because costs are so high… So while the changes to Stamp Duty are welcomed, the real issue is the ever increasing costs of housing and I haven’t seen the Government come up with anything to address that.”
Under the new reforms, homebuyers will only be taxed on a proportion of property price above newly revised thresholds. The system will be graduated, much like income tax, preventing “distortions” felt at the lower end of the market.
Buyers will pay no stamp duty on the first £125,000 of a property, two per cent up to £250,000, five per cent up to £952,000, 10 per cent up to £1.5 million and then 12 per cent on all property valued higher.
This replaces the former “slab” system, which created leaps in tax when property prices dipped into higher bands. For example, a property worth £250,000, would have an additional £2,500 in tax, yet houses worth just a pound more would see a tripling in tax to over £7,500.
Many have dubbed the reforms as the Tory’s answer to Labour’s mansion tax. Shabana Mahmood, member of the shadow Exchequer, said last week: “If they [the Conservatives] keep creeping toward an actual Mansion Tax… why won’t they make that final leap and adopt our proposals and therefore guarantee an annual sum of money to the NHS.”
Osbourne said the tax overhaul will cost the Government £800 million a year, but was needed to remove the “burden of stamp duty [which] has increased on low and middle income families trying to buy a new home”.
The view from the streets
Sarah Jolley, 32, a nurse and midwife currently renting in South Croydon gave a cautious response to the reforms. She said: “I’m looking to buy in the near future and it will benefit me when I decide to do so, but prices are still too high. People are having to pay way over the odds for property in London… The new stamp duty will benefit people, but they are still paying too much already so I don’t see it as a massive saving”.
Others welcomed the changes. Raymond Foster, 62, a civil servant and homeowner in South Croydon said: “My wife and I are looking to move in the next few years, so these new stamp duty bands are something to look forward to and it’s nice to know that things are going down… my eldest daughter is currently renting in London so it’s going to be good for her. It’s good news for everyone.”
Adam Cleaver, 25, a restaurant manager and owner of a two-bedroom flat in Ladywell, Lewisham said: “Overall I’d say it’s positive, particularly for first time buyers with smaller budgets… although not perfect. I think a more graduated system is a step in the right direction.”
Alice Burnfield, 27, a stylist and owner of a one-bedroom flat in Stoke Newington, Hackney said: “I think the reforms are excellent… the amount of stamp duty I had to pay for my flat was ridiculously high. I also think that people buying more expensive properties who can afford to pay more should be forced to do so.