To sell or not to sell in light of the Budget

 
Ed Mead
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DIRECTOR, DOUGLAS AND GORDON

Q In light of the Budget I’m wondering whether I should put my house in Battersea on the market as it’s been valued at just over £2m.

A The Budget has confused a lot of people but the most pronounced effect is where a property is being bought, with a value over £2m, in a company name. Stamp Duty Land Tax (SDLT) for those buyers is 15 per cent, not 7 per cent. Battersea buyers are unlikely to be affected as the vast majority buy in their own names there. However, it bears looking at to see what the short-term effects on value at just around the threshold might be.

Historically, a disproportionate number of deals tend to be done at just below changed SDLT thresholds and so it’s likely the same will happen here. A jump from 5 per cent to 7 per cent for individuals is not insignificant, but who wants to pay an extra £40k if they don’t have to? So it would seem obvious that anyone who’s been expecting just over £2m may need to trim expectations. But there is a bright spot, especially for those in markets where £2m is the top local value insofar as many will seek to mitigate their exposure to SDLT by looking at property under £2m.

Ironically, this will increase values for property just below the threshold given demand will surely increase. Let’s hope that demand doesn’t then push those values over £2m. For other markets like Chelsea where the average value is around £2m this effect will be a lot more marked. And 40 per cent of transactions there use corporate structures (not just offshore) in some form and in my experience the majority aren’t trying to avoid SDLT; they’ll pay the tax as will anyone that buys their properties.

However, the catch-all nature of the wording means they’ll all be paying this 15 per cent, putting them at a disadvantage to individuals who’ll be paying 7 per cent.