In the first two quarters of last year, trading for us, was positively awful in all price ranges, so much so, that we thought our phones had been ‘cut off’ by our competitors and that the ‘end of the world was nigh!’
Thank goodness, from July 2017 until the present day, certainly amongst the international buying community, the word is out that London property prices are now cheap, having been decimated by the ridiculous Stamp Duty hikes of the last Chancellor, where discount on values in the order of 30%, are now quite common.
£381million of residential property sold
Yes, transactions are down by 70%, but for those who ‘have to buy’, the world is now their oyster and, in the last four trading quarters, Glentree International has presided over sales of £381million of residential property, in all price ranges and this represents 10-15% of all luxury properties sold in London.
Even the Russians and Eastern Europeans are back in the fray, despite the sanctions and vitriolic rhetoric that is being spewed out by the press recently.
By any interpretation, this is a humungous figure and it may well be that we are enjoying the ‘first fruits of Brexit’.
International ‘feeding frenzy’
Foreign buyers are gorging themselves on a ‘feeding frenzy’ of property where the combination of the currency and price discount of up to 50% has not been seen since the turbulent days following the 2008 Credit Crunch. Even domestic purchasers are using their buying power to exact attractive deals on properties of between £1-3million, such that a sale in this sector, which was taking 6-9 months, now consumes only 6-8 weeks. The stumbling block in this sector is invariably the tortuous regulatory hurdles, that need to be overcome to obtain a mortgage and the additional impediment of long chains of sales which have been characteristic over the past years trading.
Sadly for the moment at least, we have lost the ‘wouldn’t it be nice to buy’ purchasers, since the Stamp Duty impediment is a substantial deterrent to anyone moving from one property to another, where the difference in value and size is relatively modest.
By way of illustration, if you bought and sold a £5million property today you would need to find the best part of almost £800,000 for the Stamp Duty and professional fees for the move, assuming you own more than one property. This money would fund an awful lot of improvements and extensions, to your existing home, rather than squandering it on mindless taxes.
Speed bumps not ‘stingers’
Whilst it was a laudable aim to try to slow down the frenetic pace of the Residential Property Market, the hapless former Chancellor, Osborne, could have used ‘speed bumps’ rather than ‘stingers’, which are the equivalent of spikes in the road. This has caused the ‘car crash’ that has had a profound affect on retail spending and as this is intrinsically linked to the consumer lead economy, has had a deleterious effect on UK growth.
Lest we forget, the UK economy has not only lost this stimulant, but also the positive effect of ‘cheap money’ and quantitative easing. Is it any wonder why the UK is growing at a far lesser pace? May I remind you, that this has nothing to do with Brexit.
My remedies
Trusting that amending Stamp Duty rates would be too much of a political ‘hot potato’ in the febrile political atmosphere of the Commons today on this matter, I may have a remedy to alleviate this problem:
1. Get the purchaser to share the Stamp Duty liability with the seller. Just because the long held tradition of the purchaser paying all this liability in the past, there is no reason why this could not be changed.
2. If you move from one property to another and remain in the second property for a substantial amount of time, there should be some sort of roll-over provision for Stamp Duty, in a similar vein to that of the American model, with Capital Gains Tax on personal, private, residences. This will stop speculators taking advantage of this provision, since they instinctively want to ‘get in and out’ of a transaction as quickly as possible and therefore, they would still be liable to the full Stamp Duty rate.
If these amendments were to be adopted, at least it would help with turnover and liquidity of the Residential Property Markets and alleviate the massive ‘tax wall’ that is now imposed on a prospective purchaser, rendering only the most anxious of them, active buyers.
Don’t forget, Stamp Duty is perfectly payable, but perfectly avoidable if you don’t move.
PS: If we really believe in this country and we are proud to be British, why not have a mandatory imposition that all British products should be emblazoned with a Union Jack? Lets see how many foreign products are then bought in preference, when you ‘stir up’ a positive sense of nationalism!