London property stamp duty income set to fall

We can only hope that eventually governments of the day will learn lessons from the past and stop milking the UK property market to shore up failing budgets. After increase in the rate of stamp duty on houses towards the higher end of the spectrum the government is now looking at a potential £10 billion shortfall in London property stamp duty income over the next five years. This is a phenomenal reduction in forecast stamp duty but one which lies fairly and squarely at the door of the authorities.

Has the golden goose stopped laying?

The London property market has been an extremely lucrative income stream for UK governments for many years. We are talking about houses selling for in excess of £1.5 million and attracting significant stamp duty and other charges. The recent increase in stamp duty to 12% on homes over £1.5 million, rising to 15% for second home purchases, had the potential to significantly increase stamp duty revenues. However, early signs suggest that concerns regarding Brexit and the ever increasing taxation charge on UK property may, possibly only temporarily, have stopped the golden goose from laying any more eggs.

Governments have been warned time and time again that constant milking of the UK property market will eventually run dry. Whenever budgets have been short the UK property market, and UK property investors, have been seen as an easy target. The headlines yesterday, such as “Chancellor bans letting agent fees”, were obviously very emotive but ultimately nothing but moving boxes. At the end of the day many of the charges highlighted by the Chancellor, charges made to tenants, will ultimately be transferred to landlords who will then increase rents. Simple?

When will we see property taxes falling?

At this moment in time, with the UK economy starting to show signs of a slowdown, the UK property market is seen as an easy target. A potential £10 billion shortfall in London property market stamp duty (over the next 5 years) and a general slowdown in income tax receipts ultimately means there will be no short to medium-term reduction in property taxes. Whether we see any increases in the short to medium term remains to be seen because surely there is limited scope?

The most popular craze in Westminster at the moment is to stigmatise property investors who “are making significant returns” thereby making them legitimate targets in the eyes of many. However, there could be trouble ahead.

Investment in UK housing stock

The UK government announced an investment of £1.4 billion to build 40,000 affordable houses across the UK. This is obviously a positive move but just the tip of the housing shortage iceberg in the short, medium and longer term. The fact is that the authorities need property investors to significantly increase this £1.4 billion figure but if returns are diminished because of ever increasing taxes, will investors be willing to step up to the mark?

The UK government, as well as opposition politicians, need to think very carefully about the next attack on the UK property market. An ever-growing shortage of rental property is pushing rents higher and higher with no solution in sight. If, due to ever increasing taxes, property investors pulled back from the market then this problem will only get worse. Surely it is time that the authorities started giving back to the property market rather than milking the sector for every last drop?


2 Responses to “London property stamp duty income set to fall”

  1. Pffff… yes, because current London property market that is ranked by UBS as a most expensive in the world is a healthy market and poor, poor people that hold properties in the city are abused by the government, don’t make me lough with articles like this. Either is blown by speculative capital or hidden inflation and taxes are the smallest problem London is facing.

    Reply

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