British homebuyers may have welcomed the extension of the stamp duty land tax holiday until September, but the benefit was far less significant for wealthy London buyers purchasing at the top end of the market.
With average property prices in Central London reaching £1.45M and Greater London averaging £644,631, the £500,000 threshold for stamp duty relief provided only a limited reduction in the overall costs associated with purchasing prime property.
A decade earlier, buying a home for more than £500,000 may have been considered a high-end purchase. However, substantial house price growth across London has since pushed many buyers into significantly higher price brackets.
The pandemic also increased demand for larger homes with more outdoor space, as buyers looked to create a better balance between working and living at home. Properties offering these features were in particularly high demand and often commanded prices of £1M or more.
As a result, buyers purchasing prime properties valued at £3M or above continued to contribute a substantial proportion of the total stamp duty paid across England, despite accounting for only a small fraction of overall market transactions.
Research by Enness Global Mortgages found that London’s high-end homebuyers accounted for 12% of the total stamp duty paid across England in 2020, despite representing just 0.1% of property transactions.
London’s prime buyers paid a combined £368.6M in stamp duty during 2020 alone, demonstrating the significant contribution made by the top tier of the market.
While buyers at the higher end of the London market still benefited from the stamp duty holiday, the estimated £4.5M saved since the introduction of the relief represented just 0.4% of the total stamp duty savings made across England.
Across the UK, prime property buyers purchased 846 homes valued at £3M or more, accounting for a very small proportion of overall transactions while contributing a far greater share of stamp duty receipts.
The breakdown:
Stamp duty remained only one part of the overall financial picture when purchasing a property. Factors such as the purchase price negotiated, potential for future value growth, financing costs and currency considerations could all influence the true cost and value of a transaction.
For buyers at the very top of the market, stamp duty was generally less likely to be the deciding factor when purchasing property. As a result, the stamp duty holiday was unlikely to have created the same urgency to complete seen across the mainstream housing market.
The position was different for overseas buyers, who were not expected to benefit in the same way from the stamp duty holiday and faced an additional 2% surcharge for non-UK residents.
For a high-value property purchase, this additional surcharge could significantly increase the overall stamp duty liability. On an initial purchase, the amount owed could rise from £378,750 to £473,750, while the tax bill on a secondary property could increase from £498,750 to £593,750.
Despite the additional cost, prime London property continued to hold strong appeal for international buyers and remained an important component of many global property portfolios.
