The asking price for Colin Roberts’ house in Leicestershire has dropped by £70,050- bringing a stamp duty saving of £7,000.
The shake up of stamp duty was announced on Wednesday at 1.15pm. By 1.30pm Colin Roberts, whose five bedroom detached Leicestershire home was on the market for £995,000, had emailed his agent and instructed him to reduce the asking price to £924,950. He may well have been the first seller in the country to make that move, saving his buyer £7,000 in stamp duty.
“I had changed the price before George Osborne even sat down,” says Roberts. “It just made sense. If I’d kept the asking price where it was, my home would have been in the higher rate bracket. Fortune favours the brave.”
The selling agent Alasdair Dunne, a partner of the Fisher German estate agency, believes Roberts will be the first of many of his clients to drop the asking price. Though most will find it far more difficult to accept the inevitable. “There are lots of interesting phone calls that i need to make with vendors… the market above £1million has been awful this year, and this news is going to make it worse,” says Dunne.
Solicitors also felt the impact of the chancellor’s news as they came under intense pressure from clients buying homes valued over £937,500 who had not yet exchanged. (Only homeowners who had exchanged were offered the option of choosing whether they wanted to go with the old or new regime.)
Robin Chatwin, director of Wandsworth office of Savills, said on Wednesday that a number of his clients were “madly trying to move through to exchange” before midnight, by which point the changes would be introduced, in the end, 26 Savills clients in South London managed to exchange in time. Another Savills agent reported a husband phoning his wife, who was having lunch with friends, insisting that she go home immediately to apply pressure on their lawyer instead.
“The last time something similar happened, when the tax was raised to 7 per cent above £2million, we had a client whose lawyer was in hospital. My client rang and said “I don’t care what is wrong with you, make sure my property exchanges today.” And it did. “There will be people having similar conversations this afternoon” says Chatwin.
In the medium term, he believes the sector likely to be most affected will be the £1.5million to £2million property- considered a comfort zone; it was here that buyers felt safe from the mansion tax and 7 per cent stamp duty. “It is a big ask to expect buyers to find an extra £53,750, as they will have to if they are buying a £2million,” says Chatwin.
The worst outcome for homeowners around this threshold, as Trevor Abrahnsohn, a director of Glentree Estates agency, points out, is if Labour wins the general election. They would then have to foot the bill for the new Tory stamp duty regime as well as Labour’s proposed annual mansion tax., which Ed Balls, the shadow chancellor, confirmed this week would go ahead.
Osborne’s changes ought to “put an end to any argument that these properties are under-taxed” and undermine any case for a mansion tax, says Lucian Cook, the head of UK residential research for Savills. He estimates that £2.2billion of stamp duty receipts will now come from property worth more than £2million. One third of stamp duty revenues from residential property will be generates by fewer than 5,000 sales., less than 0.5 per cent of all transactions. He also suggests that the change will stimulate transactions at the lower end of the market.
At the top end, agents are making dire predictions. Camilla Dell, the managing partner of the Black Brick buying agency, predicts and “acute” impact for the £10million-plus market. She says a buyer of a £20million home will have to find an extra £1million as a result of the reforms. Lower and mid-market volume housebuilders, meanwhile, are certainly not complaining; Barratt Developments and Taylor Wimpey saw their share price close trading 1.7 per cent higher than on the previous day.