When the Government introduced the increased Stamp Duty Land Tax (SDLT) for second homeowners, there was significant concern in the legal sector that this could account for a reduced amount of conveyancing work for law firms, as people delayed, or even postponed, their Buy to Let purchase in view of the increased cost.
At the time the Government stated that this levy was not likely to affect property prices and that their aim was to give first time buyers a chance to get a foot on the property ladder whilst fighting off competition from property investors. The figures however tell a different story.
Residential property sales increased by a massive 71% between February and March 2016 in the lead up to the changes to SDLT introduced in April 2016. The figures had such an impact that the sale of flats and maisonettes in March 2016 was more than double the average compared to the last five years.
London has seemingly been hit hard by the new tax levy. In the six months from May to October 2016, there was a 60% fall in transactions over £5m and more than a 33% fall in the number of transactions between £1m and £5m. As potential purchasers are faced with a tax of up to 13% of the value of their homes priced at more than £925,000, which in London is not difficult to do, it is hardly surprising that people are stalling their purchase of additional properties. These reasons are also likely to see ceiling prices come down in places like London, but perhaps even for the rest of the country too.
However, it might not be all doom and gloom. According to the Royal Institution of Chartered Surveyors (RICS), the property market has been flat lining for a while overall – since way before the SDLT increases. Actually, RICS has sighted a different reason for the recent price stall and that is the current political uncertainty, which was named by 44% of surveyors as the main reason for pessimism by investors. This figure is nearly double the number who blamed Brexit.
Recent research by RICS suggests that property values are actually increasing overall, so there may be some light at the end of the tunnel for property lawyers and conveyancers in the next 12 months – we shall wait and see!
Wilkins Kennedy offers a specialist service for law firms, including tailored seminars via the WK Law programme. If you would like some advice relating to the running of your legal practice, please contact us.
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