Will new stamp duty tip the balance?

Alan Williams, Fenn Wright’s managing partner, reflects on the market events of 2014 and looks to 2015.

Up until September, the residential sales market was characterised by high demand for a limited supply of available property and that inevitably drove asking prices up.

The National Association of Estates Agents has recently reported that, in October, the available ‘stock’ of properties for sale with their member agents was 15 per cent higher than the monthly average for the rest of 2014 – and at its highest level since October 2013.

With supply showing signs of an increase, the number of house hunters registered fell, easing the balance between the number of available homes and demand.

Since the early part of the year, we have also seen the number of first time buyers fall due in no small part to the implementation of MMR (mortgage market review) by the Bank of England in the summer. This makes it harder for first time buyers to get the mortgage they need.

When the government launched its Help to Buy schemes, first time buyer demand was stimulated and this served as kindling to re-light the fire in terms of overall demand in the market – with worryingly familiar signs that prices were starting to rocket again.  Governor of the Bank of England, Mark Carney expressed concern and signalled that, if this continued, measures might be needed to cool the market. MMR seemed to do the trick.

Like farmers, estate agents are never entirely happy with prevailing conditions and we would like to see more first time buyers able to choose between buying or renting rather than feeling like trapped tenants for whom home ownership is always just out of reach. However, a more balanced market keeps house price inflation in check and gradually improves affordability.

Now, as the year draws to a close we have in the chancellor’s Autumn Statement some fairly radical changes to stamp duty.

– No tax on the first £125,000 paid
– 2% on the portion up to £250,000
– 5% up to £925,000
– 10% up to £1.5 million
– 12% on everything above that.

As a result, the government estimate stamp duty will be cut for 98% of home buyers.
Someone looking to buy a home for £275,000 today – who would have been paying 3% under the old system would have budgeted for a stamp duty bill of £8,250. Now they will pay just be £3,750 – a saving of £4,500.

For homes priced over £1m, the situation moves from neutral to decidedly negative around £1.5m and above. This will certainly not help top end market transaction volumes and sellers will need to get their pricing strategy right. However, experience tells us that a really special property can often attract the right buyer with deep enough pockets.

At Fenn Wright, we are re-opening negotiations between some potential buyers of our clients’ properties on the basis that they now have the opportunity to improve previously unsuccessful offers. And we have had some great results already. We are also encouraging pre-Christmas viewings from ‘hibernating’ buyers on the basis that we now expect January to start with a bang.”

To find out how much your home may be worth and how we could help you sell it in this market please get in touch. We’re happy to provide free marketing valuations and advice. Just give us a call or use our online form to request a valuation.

For the curious, HMRC have released a stamp duty calculator showing old and new amounts payable.