Thursday 18 December 2014

How will the stamp duty changes affect the Chichester property market?

Chichester Observer cutting - Chichester Property
This article was featured in the Chichester Observer on 18th December 2014.

Since the stamp duty system was reformed two weeks ago, numerous people have asked me for my opinion on how this will affect Chichester’s property market.
For those who don’t know, the stamp duty system used to run on a ‘slab structure’, whereby you paid a single rate of tax on the entire purchase price.
Now, much like income tax, buyers only pay the rate of tax on the part of the property price within each tax band.
Nationally it has been muted that “98% of home buyers will benefit”. Indeed, all purchases below £925,000 will see the stamp duty bill either decrease or remain the same, with the most significant savings just above the previous stamp duty thresholds (i.e. £125,000, £250,000, £500,000 & £1 million).

But what does this mean for the property market in Chichester?

The average property value in Chichester is £367,571. This purchase price would have resulted in a stamp duty bill of £11,027, whereas now the buyer will pay ‘just’ £8,379, a saving of £2,648.
There are currently 225 properties for sale in Chichester. Of these, just seven (3%) are of a price whereby the eventual buyer will pay more stamp duty now than they would have done under the old system.
Clearly, the majority will be better off under the new system, which can only be a positive step for buyers struggling to raise the significant deposits required to buy.
Spare a thought though for the eventual buyer of the most expensive property on the market in Chichester (priced at £3.3m) who will now face a stamp duty bill of £309,750 (an additional £78,750 than the £231,000 bill under the old system).
I believe the most significant impact of the changes will be in the so-called ‘dead-zones’ that the previous system promoted. The most common example of this was if you paid £250,000 for a property you would pay £2,500 in stamp duty, yet a price just £1 higher (i.e. £250,001) would’ve resulted in a stamp duty bill for £7,500! This distorted prices as buyers were reluctant to offer just above the thresholds.
There are 21 properties for sale in Chichester that are priced between £250,001 - £275,000, meaning a significant 9% of the total sales market have a far greater chance of achieving their true value as opposed to getting dragged down to the previous £250,000 price point.
This is also good news for those buying a property just under one of the old thresholds. Let’s say you bought a £240,000 property and prices locally increased 10%. You’d think your property should now be worth £264,000, but for the reasons above it would likely be capped at £250,000 until such time as the price comprehensively went above the £250,000 mark.

If you have any questions regarding the stamp duty reform or you’d like to know how it might affect your property, please get in touch.


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