Autumn Statement 2017 - response
In a landmark change to stamp duty, the Chancellor yesterday announced the abolition of Stamp Duty for first time buyers across the country, for purchases priced under £300,000. For London’s first time buyers (FTB), the Stamp Duty exemption is available on the first £300,000 spent on properties valued up to £500,000.
Stamp Duty changes
Cluttons head of research, Faisal Durrani, explained: “This certainly is not the panacea we were hoping for and will not go far enough for buyers in Prime Central London. Yesterday’s announcement has not been the turning point the market has been eagerly anticipating ever since the Brexit referendum brought the stamp duty burdened market to a standstill.
“That said, in this market that has been plagued by one bad news story after another, today’s landmark change to stamp duty is going to inject a boost of positivity and energy into the UK property market. Within Central London, of the 47 submarkets we track, 23 locations may see an increased interest from FTB, but with mostly studio flats qualifying for the Stamp Duty relief, it is unlikely that we will see a rush of buying activity. Just 15% of all Prime Central London transactions are below £500,000 and so a £5,000 saving for Central London buyers, where average properties cost £2 million, is unlikely to be a game changer. The policy announcement will benefit the areas beyond Zone 1, while leaving the location at the heart of the current stalemate untouched and almost left to wither on the vine”.
Cluttons forecasts a 7.3% rise in capital values in the five years to the end of 2021 for prime Central London, which would see markets like St. John’s Wood and Covent Garden drop out of the running for first time buyer targets as average house prices, even for studios, would exceed the Chancellor’s £500,000 threshold.
“Markets like Canary Wharf, where studios and one-bedroom flats can be bought for under £500,000, may emerge as one of the beneficiaries of the Stamp Duty changes, which will be well received by developers in the area and also ties in well with the Government’s longer-term vision of an intensification of development in east London, which is quickly emerging as the ‘London of tomorrow’. In fact we had our first enquiry just minutes after the Chancellor finished his speech”, said James Hyman, Cluttons head of residential agency.
The ‘empty homes tax’
On the doubling of Council Tax rates for empty properties, Cluttons said that for wealthy international buyers, an extra £2,000 in annual Council Tax, the highest rate for the Royal Borough of Kensington and Chelsea, is unlikely to make a material change to the attractiveness of London as an investment destination.
Durrani highlighted, “International buyers who invest in London’s golden postcodes are unlikely to be dissuaded by a doubling in Council Tax rates. Sadly, this appears to be an attempt at garnering political goodwill, rather than addressing the root problem in London’s housing market – affordability.”
On Business Rates changes, Cluttons head of rating and compensation, Peter Chapman said: “Based on the September RPI figure, the UBR is projected to increase by 3.9%. Many business organisations, including the CBI, have for some time called for this to change to CPI which the Government has announced will happen in April 2018. Businesses will still see an increase of 3% on their rates bill next year, instead of 4%. This is also critical in light of the way inflation is heading.”
It was also announced that there will be an increase in frequency of VOA revaluations from five years to three years. The impact on rate payers will be the requirement for more regular information gathered for the valuation office to assess. However, on a more positive note they will be able to see a stronger link between the rates they pay and their property value.
Cluttons has also highlighted that rate payers have been frustrated by the difficulties experienced in trying to register on the Valuation Office Agency (VOA) Government Gateway since the revaluation took place on the 1 April 2017 as this has suffered numerous technical problems since its introduction.
“It is a pity that additional resources were not announced that would provide an automated system to enable agents to assist multinational businesses in uploading properties on to the VOA website on their behalf”, said Chapman.
“Furthermore, the £435m pot announced in the last Budget has only recently been rolled out by Local Authorities and clearer guidance is required by Government in relation to when this should be granted. For example, Camden automatically award this relief to ratepayers whose rateable value is under £200,000. This is in contrast to Westminster where the rate payers are required to apply for the relief and only qualify if they have no more than two properties. They also need to demonstrate that their business benefits the local community. Again, it is a pity clearer guidance on how this should be distributed has not been announced”, concluded Chapman.