Ivor Dickinson, managing director of Douglas & Gordon, says buyers at the £1m mark are going to feel squeezed much more than those buying at over £5m: ‘The new year’s sales market has been somewhat thwarted due to the increase in VAT to 20% – effectively a 2.5% hike in the cost of purchasing a new home, moving and renovations.
‘This is likely to be exacerbated by the 1% increase in Stamp Duty in April on properties worth over £1million. Vendors of property worth less than £1m have already started putting their properties on the market to be able to upsize over the £1million mark before April. These sellers are, in London, supplying a good proportion of the limited stock.
‘The increased tax will increase the cost of moving by a least £10,000 and can only harm volumes at this level in the second half of the year. Buyers will no doubt negotiate harder and use the increase in stamp duty as leverage to negotiate on price.
‘Buyers at the £1million mark are slightly more price sensitive than those above £5m – to them, an increase in Stamp Duty of 1% (equivalent to £10,000) could mean delaying the installation of a new kitchen or bathroom.’
Catherine Penman, head of research, Carter Jonas, commented: ‘The increase in Stamp Duty Land Tax in April 2011 from 4% to 5% for properties valued over £1 million is expected to have the most pronounced impact on houses the £1m – 1.5 million price bracket. Pressure will be applied for some purchasers to reduce prices wherever possible to a figure just shy of the ceiling and a flurry of activity is therefore anticipated prior to April followed by a temporary lull shortly afterwards.’
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Tony Gambrill from Chesterton Humberts‘ comments on his London market that we could see more changes the closer we get to the deadline: ‘The looming 1% Stamp Duty increase for properties over £1m has not as yet had a noticeable effect on the London market. Nearer the time, we predict that those properties on the market for just over £1m will be reduced in price to the million pound mark. Buyers will undoubtedly push down on price on such properties in order to avoid the extra Stamp Duty.
‘However, those properties over £1.25m will probably remain at their original price. Once a buyer finds their ideal home, it is unlikely that they will be put off by this increased Stamp Duty, however much of a nuisance it may be. This especially rings true in today’s market with low stock supplies and a considered approach to buying property.”
James Grillo of the Chesterton Humberts Country department, adds: ‘We have come across a few buyers who are getting a little nervous about the increase in Stamp Duty this year; however, overall the impact hasn’t been as dramatic as expected: some purchasers looking between £1m and £1.5m are now trying very hard to find and complete on a property before the end of March.’
Instead he has seen people looking more in the bottom drawer for houses to buy: ‘We are seeing an ever increasing number of properties being sold off-market prior to the April deadline; vendors know that they can access a ready market of buyers who will want to act sooner rather than later on the right property.
‘Post-April we are expecting few properties to be valued between £1m to £1.25m and those that are may well suffer a downwards negotiation to below the million mark. Those vendors with house that are clearly worth more than £1m will understandably want to quote prices of over £1.25m.’
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