After Britain’s monumental vote for departure from the European Union in June this year, there have been many consequences to the housing market and other areas of the economy. As the United Kingdom recovers, however, one result of this exit was the fall of house sales in Britain. The new government formed under new Prime Minister Theresa May are putting in measures to be met out on the property market with the aim to revive the investment in housing, especially in the capital.
This week, the Evening Standard has reported that a suspension on the stamp duty could improve the outlook on house sales and prevent foreign investors from pricing people out of London. The article highlights the initial impact of Brexit on the property market, with the Land Registry publishing its report from April 2015 to April 2016 on London’s boroughs. In Kensington & Chelsea saw a sales slump in all price brackets in April this year of 72 % from last April – it was already down by 41 % the previous year. The stamp duty hike which cause a crash in sales was put into effect in December 2014. But the whole of England has also suffered fairly badly.
If we take a look back at sales from April 2000 to 2007, the figures were 70,000 to 80,000. During the recession from April 2008 to 2009, sales had fallen to 53,000 and 37,000 respectively. April 2014 saw a great recovery of up to 71,000 sales. But April 2016 has seen the worst levels post-recession, with an added tax burden in December 2015 and a hike for for investors this April, resulting in 42,000 sales. This has meant a decrease in stamp duty taxes, as lower sales means lower stamp duty pay. This may call for a reduction in stamp duty when we have the Autumn statement read.
The article continues to disclose that due to the fall of the pound after Brexit and the loosening of monetary policy meted out by the Bank of England, increasing inquiries are being made by foreign investors. The property firm John Taylor noted that after the EU referendum in June, there was a 1,200 % increase in property inquiries from prospective buyers, with 80% being from overseas. As the dust settles after the departure, the amount of foreign interest will continue as the pound remains to fall against the dollar.
Norman Lamont, a former Chancellor, had suspended the stamp duty in the 1991 recession in order to boost a recovery in sales. This helped the property sector greatly, and so a similar move may be on the cards next year if there is no sign of healing in the housing market. There could be a proposal to have the stamp duty on a two-tier basis: one tier for UK residents on the old rate of 5%, and the second tier for international investors at a higher rate. Whilst not currently allowed under EU law, with the exit if Britain from the EU, this could be done to aid in preventing foreign buyers from making housing in the capital unaffordable for those who live here.