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.”
