The government’s stamp duty reforms are so punitive they have made purchasing a home less financially viable than renting in some cases and have led to a dangerous slowdown in the market, exclusive new research by Savills reveals.
Lending weight to Property Week’s Call Off Duty campaign, the research shows that the money spent on stamp duty could fund the rent of those same properties for many years.
The Savills data suggests for a buyer purchasing a £2m home as their sole property, the £153,750 stamp duty charge could cover the rent for two-and-a-half years, assuming a 3% yield. At £2.5m, that time period extends to nearly three years, and for a £3.5m property at a 2.75% yield, the mammoth £333,750 stamp duty would pay for rent for three-and-a-half years.
The impact is even more profound at the super-prime level. For homes of £5m, £7.5m and £10m, buyers are spending more than four years’ worth of rent on stamp duty, the research shows.
“You’re putting down a significant amount of dead money,” said Lucian Cook, director of residential research at Savills. “For some buyers, instead of buying they do look at renting as an alternative.”
The impact had led to a “reduction in demand, which means a lower-turnover market”, he added. “We know from everything we’ve seen that the market has been adversely affected by the changes.”
It was not just the prime end of the market that was being hit hard, warned Julian Goddard, partner at consultancy Daniel Watney. The data showed stamp duty was a “tax on mobility and investment” across a significant chunk of the housing market, he argued.
“The biggest losers from its increasing grip are middle-class families across London and the South East,” he said. “While it’s right that our government should tax the wealthiest in society, tax policy should be proportionate and work in harmony with the economy and society as a whole.”
Call Off Duty
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Investors have been hardest hit by former chancellor George Osborne’s stamp duty reforms, which introduced a 3% surcharge on all purchases for those who own more than one home.
For a £2m home, an investor will pay the equivalent of more than three-and-a-half years’ rent in stamp duty, and at £5m, they are paying stamp duty equivalent to more than five years of rent, according to the Savills research.