After months of uncertainty for prospective and current sellers alike, in the lead-up to the 2015 general election, Ed Miliband’s boisterous hollers for a Mansion Tax were finally quashed with a convincing Tory victory. With calm restored and everyone’s nerves settled, expectations were that business would carry on as usual and house prices would continue to rise with a renewed vigour in the absence of the threat of higher taxes on property transactions that exceeded the £2 million mark. Many felt that the market would see considerably increased activity as buyers and sellers, who were once tense in the face of an oncoming Labour tax storm, would now go ahead with any negotiations that had previously been in danger of falling into this category. However, this hasn’t happened and the reason why it hasn’t is both unsurprising and perhaps was also previously slightly under considered.
The truth is that the excitement around the General Election has somewhat masked the affects that the new Stamp Duty Land Tax (SDLT) has had on the market in the UK. We are still adjusting to changes made to SDLT in December 2014 by George Osborne. The new rule, passed in the Autumn Budget, changed the SDLT from a single rate on the overall price to paying a rate that varies over different price brackets, in the same way that income tax does. Under the new system, the SDLT charge is now significantly less for lower priced homes until it reaches around the £940,000 mark, the catalyst at which point purchasers now see an increased level of stamp duty. These changes have seen an increase in sales of houses under the £1 million mark but have obviously played their part in slowing down transactions on more expensive properties.
The change in SDLT is certain to have an effect on house sales in the £1 million-plus bracket. However, after a record year in 2014 for this category – there were 14,000 homes sold, nationally, at a total of £26 billion – the market is assured to see continuous price rises, although now at a slightly slower pace. For Henley-on-Thames, where the average house price is around £540,000, there should be no reason for this property boom to subside and for owners in the £2 million-plus mark, the changes to SDLT are still much more favourable to the Labour government’s proposed Mansion Tax. Homeowners in the £1 million-plus market may be slightly perturbed as the market starts to slow down but should be buoyed by Henley’s continuously increasing popularity as a relocation favourite for tired Londoners looking to escape to the quiet, the greenery and a much cleaner part of the river.
Partner, Heaton and Partners