Soaring stamp duty fuel housing crisis as UK deals with highest property tax in developed world
Demands from the Treasury that homebuyers should pay thousands of pounds out of already taxed income is affecting the supply of homes being built and sold, warned the head of one of the world's biggest property groups.
Christian Ulbrich, chief executive of property investment managers Jones Lang LaSalle, said stamp duty is making it "prohibitive" to build more houses.
"For long-term development, stamp duty is definitely harmful, because the stamp duty in itself doesn't create any value, he added.
"It's an additional cost that makes development more unattractive and it has to be considered in the pricing.
"Stamp duty doesn't help to build one single apartment, it just makes it more expensive."
Mr Ulbrich pointed to figures from the Organisation for Economic Co-operation and Development showing Britain has the highest property taxes of any developed country.
The Treasury demand is affecting the supply of new homes being built in the UK
He also slammed the three per cent surcharge – introduced last April – on buy-to-let properties and second homes, which has had a "very strong dampening impact on the market."
We need more building. That is good for the economy
Christian Ulbrich, Jones Lang LaSalle
Homebuyers were "paying for nothing" in a system that penalised landlords and second homeowners while doing little to address a lack of housing supply.
Former Chancellor of the Exchequer, George Osborne cut the rate of tax for the vast majority of house purchases with a big overhaul of the system in 2014.
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Stamp duty was changed from a slab system (where a single rate was paid on the entire property price) to a more progressive system where the buyer pays the rate for the proportion of the property that is at that rate.
Stamp duty was never changed from a slab system to a more progressive system
No amount is due on a home bought for less than £125,000, then two per cent is paid on any purchase price between £125,000 and £250,000 and five per cent on the value of the property above £250,000.
But the change in the system, where stamp duty jumps from five per cent to 10 per cent of a property's value above £925,000, was "politically motivated", according to Mr Ulbrich.
He said he understood aims to reduce the influx of foreign money into the British property market, which Mr Ulbrich said would remain a haven for overseas investors, even after the Brexit vote.
Britain’s best new homes
Mon, September 8, 2014
The Royal Institute of British Architects (RIBA) has announced the shortlist for the 2014 RIBA Manser Medal, the UK’s most prestigious housing design award. A summer house by the sea on the south coast, a refurbished ‘black-house’ on the Isle of Tiree; a futuristic double height extension of a Georgian Villa in north London; a striking brick house wedged into a difficult site in Barnes village; a minimalist hidden home cut into the cliffside on the Isle of Skye and a contemporary castle nestled on a hillside in the Gower peninsula are all in the running. The RIBA Manser Medal winner will be announced at a special event on 16 October at the RIBA in London.
RIBA President Stephen Hodder said:
“The six homes in the running for this year’s Manser Medal are the best of British housing design. With each of the projects, the architects have added real value to the homeowner’s happiness and wellbeing.
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Stormy Castle is a contemporary private house in an area of outstanding natural beauty on a hillside on the Gower peninsula.
However, he said, increasing supply would help to "create an environment where that demand finds a home".
"We need more building," he said. "That is good for the economy".
Mr Ulbrich also warned that JLL would be hit by a "double whammy" this year from rising business rates and the subdued commercial property market.
George Osborne cut the rate of tax for the vast majority of house purchases in 2014
Research shows that business rate bills in London are likely to soar by £9.4bn over the next five years.
"The commercial property market is currently cooling down, at the same time, business rates are going up because they were reflective of values before the Brexit vote. But the impact is happening after the Brexit vote," he said
"We were very much hit by the overall loss in sentiment in the property market in London, and then we got the increase in business rates, so it's a real double whammy."