Changes to the Stamp Duty Land Tax have increased competition in the sub-£1m section of the property market, with more investors choosing to split their purchases, according to independent property buying agency Black Brick.
Camilla Dell, managing partner of Black Brick, said the change was undermining the Chancellor’s aim of helping buyers at the lower end of the market.
She said: “Prior to the reforms, someone with £2m to invest would have likely bought a single property. Now, a £2m property would carry stamp duty of £153,750, while two £1m properties would be taxed at £43,750 each – encouraging our £2m buy-to-let investor to buy two £1m properties and ‘save’ £66,250 in Stamp Duty.
“Our own data suggests that investors are targeting the lower end – in January to July last year, our average deal value was £3.54m. In the same period this year, that average has fallen to £1.5m.”
Dell added that the “backfired” on the treasury. She said: “The policy has also backfired on its own terms, reducing the tax-take to the Treasury – research firm LonRes calculates that Stamp Duty paid for prime London sales is down 6.4% since the reform was introduced compared with the same period last year.
“This illustrates what the Conservative party has traditionally argued: if you increase rates of tax, you depress the market and end up with less revenue.
“We are increasingly of the view that it will now take a major market correction – of perhaps 20% – to bring the Prime Central London market back to life, and we believe that correction is likely to take place over the next six to 12 months.
“All it will take is a vendor or two to accept an offer at a substantially lower price-per-square-foot, and that will ripple through the market.”