London's £1M+ Homes Decline: Stamp Duty Reform's Decade-Long Impact
Analysis reveals a 16% drop in London's million-pound homes over a decade, contrasting with a 70% rise elsewhere in England. Experts attribute this trend to George Osborne's 2014 stamp duty reforms.
The landscape of London's high-end property market has undergone a significant transformation over the past decade, according to recent analysis. The number of homes valued at £1 million or more in the capital has experienced a 16% decline since 2014. This trend stands in stark contrast to the rest of England, where million-pound properties have surged by 70% during the same period.
Lucian Cook, residential research director at Savills, the estate agency behind the analysis, attributes this downward trend primarily to changes in taxation, particularly stamp duty. The reform, introduced by then-Chancellor George Osborne in December 2014, marked a pivotal moment for the prime property market.
"The prime property market is disproportionately impacted by stamp duty reform. Osborne's big changes to it in 2014 acted as a break on prices in that market. Before that, London was in its zenith."
The 2014 stamp duty reform abolished the previous "slab" system in favor of a "slice" approach, similar to income tax. This change resulted in significantly higher tax liabilities for more expensive properties, affecting potential profits for sellers and increasing costs for buyers.
Since the reform, prices in London's prime market have fallen by 17%. This decline contrasts sharply with the pre-2014 period when London's housing market rebounded more quickly from the 2008-2009 financial crisis lows compared to the rest of the nation.
The COVID-19 pandemic further reshaped the property landscape, prompting many Londoners to seek homes in the commuter belt and beyond. This shift led to a mini house price boom outside London, reflecting a "race for space" and increased demand for larger properties in rural areas.
Additional factors have contributed to the changing dynamics of London's high-end property market. Brexit uncertainty and the introduction of a 2% stamp duty surcharge for foreign property buyers in 2021 have dampened demand for expensive homes in the capital.
Cook advises homeowners in the prime London market to have realistic expectations about their property values. As the October 2024 Budget approaches, buyers are approaching the £1 million home market cautiously, primarily due to uncertainty surrounding potential tax changes.
The impact of falling mortgage rates, typically a catalyst for increased demand in pricier properties, has been tempered by tax considerations. Cook notes, "Exposure of the main home to tax is going to temper the impact of any Bank Rate cuts and falls in interest rates."
This analysis highlights the long-term effects of policy changes on the property market, demonstrating how tax reforms can significantly influence housing trends and regional disparities in property values.
