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Stamp Duty ‘headwind’ predicted to challenge Foxtons

by: Samantha Partington
  • 09/03/2015
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Stamp Duty ‘headwind’ predicted to challenge Foxtons
Stamp Duty changes introduced in December which made it more expensive to purchase a property over £1m are expected to be the ‘biggest headwind' to the fortunes of estate agents Foxtons this year.

City analysts CMC Markets have assessed the impact of December’s property tax reforms on London-based Foxtons’ financial performance due to be announced on Wednesday.

Market analyst Jasper Lawler predicted that Foxtons would report a strong end to the year after wealthy homeowners rushed to complete transactions before the cut off on 3 December to avoid paying a higher Stamp Duty bill.

The reforms saw the old slab structure system replaced with one based on the income tax system, known as a progressive structure.

For properties priced at £937,500 or below, buyers would pay the same or less in Stamp Duty than they would have under the old regime.

Those buyers looking for properties priced at £937,501 and over would see an increase in the amount of tax they would be required to pay. Higher valued homes are now subject to a 10% rate of tax on the part of the property which falls between £925,001 and £1,500,000 and 12% for any part of the property which exceeds £1.5m. 

Lawler said these changes will make buyers of more expensive homes think twice about their property purchases. A Labour-led mansion tax could also see more pain piled onto this segment of the market, concentrated in London.

“While there are clearly more houses in London worth below £1m, the houses valued above £1m make a disproportionately large contribution towards estate agents’ commissions.

“The number of transactions in £5m plus house sales will probably be fairly stable as the super-rich can easily afford the tax changes, possibly putting the likes of top-end estate agent Savills and Knight Frank in a stronger position,” he added.

“It’s the tax hit to the upper-middle classes occupying the £1m to £5m property range that could be the biggest headwind to London-focused estate agents like Foxtons.”

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