Wealthy home buyers in London are rattled over additional costs arising from the new stamp duty rules, according to The Daily Mail citing a Knight Frank report.
As the UK housing market enters what is traditionally its busiest time of the year just days before the New Year, the consultancy warned that most players in the market have adopted a cautious stance, with uncertainty lingering in the minds of both buyers and sellers.
In autumn, the government announced plans to impose a three percent surcharge on buy-to-let landlords and second homeowners. This move followed a revision of the stamp duty system in 2014 that raised the property tax of homes costing more than £937,000.
These new measures are intended to deter wealthy buyers from purchasing second homes so that cash-strapped first-timers would have a higher chance of getting on the property ladder. And they appear to be working as residential transactions in the priciest parts of London have fallen by 20 percent year-on-year, revealed Knight Frank earlier this month.
In its most recent report, the consultancy said home prices are starting to take into account the higher stamp duty for luxury homes. “Higher transactional costs at the top end of the market are increasingly being factored into pricing,” it said.
But due to the heftier price tag, buyers are more mindful of the cost. In fact, the number of withdrawn transactions rose 12 percent on an annual basis between April and November 2015.
“The prime central London market remains fragile and price-sensitive. Buyer caution is related to high transaction costs and decisions are increasingly taken on a longer-term basis, producing a flight to quality for the best property and addresses,” added Knight Frank.
In spite of this, it believes home prices will increase by three percent next year.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
