Chancellor George Osborne confirmed in this afternoon’s Budget that Stamp Duty will rise to 7% for properties worth over £2m. Previously, all properties sold for more than £1m incurred a 5% levy.
He also announced the Stamp Duty rate for properties worth more than £2m bought via companies will be raised to 15%.
Trevor Kent, former president of the National Association of Estate Agents, says the change will hit home sales in all price brackets by causing property chains to collapse.
He also warns the levy will result in falling property prices, which will prompt mortgage lenders to lower their LTVs.
Kent says: “Higher Stamp Duty always results in property price pressure, and in this scenario there is little doubt that prices will fall across the board. Mortgage lenders rely on the expectation of a gentle long-term rise in prices to safeguard their loans, and therefore their only answer to dropping prices is to lower their LTV ratios.
“Like the 50% income tax rate, punitive charges do only one thing, kill the golden goose and starve the populous.”
Nicholas Leeming, business development director at Zoopla.co.uk, calls the new rate is misguided and says it is unlikely to generate as much revenue as the government expects.
He says: “This move will not only affect the wealthy but is likely to have an adverse impact on the entire property market. We’re likely to see a slump in activity from buyers at the top level and this will have a knock-on effect all the way down the chain.
“And whilst the government has stated that it wishes to crackdown on Stamp Duty avoidance schemes, this new rate is only likely to encourage the wealthy to find even more ways to avoid paying it.”