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August 25, 2020

What impact will the Stamp Duty Land Tax Holiday have on the Prime Central London Market?

On 8 July, Chancellor Rishi Sunak announced the immediate introduction of a nine-month Stamp Duty Land Tax (SDLT) holiday for all property purchases under £500,000. An announcement that was warmly welcomed by the property industry.

 

As a result, buyers will pay no stamp duty on the first £500,000 when they move home. In England and Northern Ireland, nearly nine out of 10 people getting on or moving up the property ladder will pay no stamp duty at all. In this post, we answer the question many are asking, how will the stamp duty land tax holiday affect the prime Central London Market?

A market stimulus

There is no denying that the housing market has faced significant challenges as a result of COVID-19, and this tax break will give the market a much-needed boost. At Keatons, we feel a property industry rejuvenation is essential if the economy is to make a strong post-pandemic recovery.  But is this tax break enough to facilitate an uplift in demand within the property market?

 

The logic behind this initiative is to spur demand, and encourage investment in bricks and mortar.  Plus, it also falls in line with the “build, build, build” agenda outlined by Boris Johnson on 30 June—a £5 billion investment into infrastructure and housing.

 

How the SDLT holiday will affect prime property transactions in Central London (PCL)?

Those who purchase PCL housing under the SDLT holiday will save around £15,000 – a substantial saving that should be enough to encourage international investors to expand their property portfolios.  According to the ONS (Office of National Statistics), in Q3 and 4 of 2019, 55% of all PCL purchases were made by foreign investors, a trend which looks like it is set to continue.  However, COVID-19 brought the market to a standstill, meaning demand for property is pent-up and ready to be released again once the pandemic begins to subside.

Within the market, there is a high level of confidence that the SDLT holiday will bring back the levels of PCL demand we saw at the end of 2019.  Plus, as all international property purchases will face a 2% SDLT surcharge from April 2021 means buyers are likely to want to act quickly when considering PCL property investment.

 

Uncertain times

The SDLT holiday should provide the sector with the boost it needs for recovery.

Of course, there is a high level of uncertainty surrounding how COVID-19 will continue to impact the property market and the economy as a whole over the coming months.  There is the risk of a second spike, virus mutation and unpredicted economic effects that could negatively impact the recovery of the property sector. Despite this, the current climate is extremely active, with a lot of demand across the market.

If you’re looking to make a purchase in London, our team of experts are on hand to help.  We pride ourselves on knowing the area inside out, and we promise to be transparent with you from the outset.  Get in touch with a member of our team today to find out more.

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