Stamp duty hikes 'really thick'
Property chains are already showing signs of crumbling due to the Government's stamp duty hikes, estate agents have warned.
Chancellor George Osborne placed a stamp duty rate of 7% on £2 million homes in Wednesday's Budget, rising to 15% for homes in this price bracket bought through companies.
The Government wants to clamp down on the practice of "enveloping", whereby people try to avoid stamp duty by using a company to buy a residential property. The home is then sold on as shares in the company in a bid to sidestep the duty normally paid.
However Ed Mead, director at London-based Douglas and Gordon, said 40% of the estate agent's business was done with companies.
He said: "These are people with natural corporations or trusts. These people are suddenly being told they've got to pay 15%. That's almost half of deals in central London. This is not going to solve anything. It's going to clobber lots and lots of normal people."
He said the people he dealt with were not trying to avoid stamp duty but bought in the name of companies and trusts "because it suits them". Mr Mead said people buying through companies would now be at a huge disadvantage if they were in competition, with individuals paying the 7% duty instead of 15%.
He said: "This really, really is thick. It hasn't been thought through. Every single deal that we've got that involves companies, the brakes have been slammed on. We've got four and I know of many, many more."
The stamp duty rises will mostly affect buyers in London, an area which has been key in supporting the market by recording consistent price growth due to strong overseas buyer interest. London homes have been vital in keeping average prices up, with the capital often viewed as the most "healthy" and stable area at a time when the housing market generally remains weak and patchy.
London asking prices have reached a high of £455,159, up 7.3% year-on-year, Rightmove found this week, while the typical asking price for homes in Kensington and Chelsea broke the £2 million barrier for the first time. The Midlands, Wales and the North West saw prices dip year-on-year.
Of the 2,834 homes sold in England and Scotland in the last two years for more than £2 million, 2,059 were in London and just two were in Yorkshire and the Humber, according to property website Zoopla.