Repeated will increase in stamp obligation have taken a heavy toll on high-end London property gross sales, with transactions in Britain’s two most costly boroughs falling by 42 per cent over the previous decade.
In keeping with new evaluation by Savills, offers in Kensington and Chelsea and Westminster have slumped from 10,665 in 2013–14 to round 6,200 in 2023–24.
The figures additionally present a warning signal for Rachel Reeves as punitive stamp obligation charges threat lowering total tax receipts. Savills knowledge means that the typical efficient stamp obligation price in these prime boroughs has virtually doubled over the previous ten years, from 5.4 per cent in 2013–14 to 10.1 per cent in 2023–24.
It’s a stark illustration of the so-called Laffer curve in motion. Conceived by the American economist Arthur Laffer, this curve means that, whereas larger tax charges can improve revenues initially, past a sure threshold receipts begin to drop as taxpayers alter their behaviour or exit the market. Lucian Prepare dinner, the Savills director behind the evaluation, mentioned: “They can only push things so far without having a detrimental impact on tax revenues.”
George Osborne, then Chancellor, set the development in 2014 by elevating charges on higher-priced properties. Subsequent surcharges for second properties (launched in 2016) and for international patrons (added in 2021) compounded the influence on prime central London. These measures have resulted in a staggering stamp obligation invoice. A UK resident buying a £10m primary dwelling in 2023–24 would face prices of round £1.1m in obligation, rising to £1.8m for an abroad purchaser selecting up a second dwelling.
But these figures don’t even mirror Ms Reeves’s newer Price range announcement so as to add one other two proportion factors to the extra properties surcharge. Property brokers warn this can additional erode the attraction of London’s most unique neighbourhoods to big-ticket patrons.
In 2010–11, transactions in Kensington and Chelsea and Westminster accounted for 9.5 per cent of all London gross sales. By 2023–24, that proportion had dropped to five.9 per cent, highlighting the dimensions of the decline. Regardless of this, gross sales in these two boroughs alone nonetheless generated £1.2bn in stamp obligation receipts in 2023–24, amounting to almost a tenth of the £14.8bn whole collected throughout England and Northern Eire.
Excessive charges of stamp obligation, coupled with Ms Reeves’s plans to abolish the beneficial non-dom tax regime from April 2025, imply costs in prime central London (PCL) are anticipated to fall subsequent yr, in line with Savills. Lucian Prepare dinner forecasts a 4 per cent drop in PCL property values.
Even so, this market stays markedly costlier than the remainder of the capital. The common property worth in Kensington and Chelsea in October 2024 stood at £1.1m — almost double London’s common of £590,000. Gross sales on the very high finish generally exceed £10m, attracting equally eye-watering stamp obligation payments.
The Treasury has change into closely depending on the highest tier of the housing marketplace for stamp obligation revenues, and specialists warn that extended suppression of transactions might in the end undermine this earnings stream. Mr Prepare dinner mentioned: “They need to be quite careful about that, given the extent to which their tax take has become very, very dependent on the health of the very top end of the market.”
As Britain’s high-end patrons weigh up tax payments that may stretch into seven figures, there are questions over whether or not stamp obligation coverage is nearing its revenue-breaking level. With prime London housing transactions persevering with to shrink, policymakers could discover that the Laffer curve’s cautionary story on the risks of overtaxation is beginning to ring true within the capital’s swankiest postcodes.
