The British government’s announcement yesterday that it would raise a tax on luxury-home purchases as of midnight sparked a last-minute push to wrap up transactions before the deadline.
Charlie Bubear, an associate director at property broker Savills Plc, rushed to finish a sale yesterday after hearing that the tax increase was imminent. Chancellor of the Exchequer George Osborne announced the increase and the deadline in his budget speech at about 2 p.m.
“We knew that the deal had to be done that day because the buyer could have reviewed the price” and made a lower offer to account for the higher tax, Bubear said by phone. “We had about 11 hours to prepare ourselves. We advised our client to get on with it and do the deal.”
The tax on properties sold for more than 2 million pounds ($3.2 million) rose to 7 percent from 5 percent. The government will also impose a 15 percent tax on homes with that value that are bought through companies, Osborne said in his budget speech.
About an hour before the budget announcement, Jonathan Godfrey, head of valuation at Hamptons International, had issued a mortgage assessment of a North London home that was being purchased for more than 3 million pounds.
“The instruction came in last week and there seemed to be no urgency, but due to the rumors in the media yesterday morning, we were asked to get the report out immediately,” Godfrey said by e-mail. “If the potential purchaser failed to exchange by midnight last night, they would have incurred an increased stamp duty liability of over 60,000 pounds.”
About 1,620 homes worth more than 2 million pounds were sold in England and Wales last year, according to the U.K. Land Registry. Luxury-home prices in central London rose the most in 10 months as overseas buyers seeking the safety of one of the world’s most resilient property markets, Knight Frank LLP said in a report today.
After Osborne’s announcement, Bubear jumped into his Audi, collected his client and sought to find a solicitor in London who could help rush through the sale of a 4 million-pound, 2,000 square-foot (186 square-meter) property in Kensington.
The threshold for the new tax is now the average asking price of a home in Kensington and Chelsea, Rightmove Plc said earlier this week. Average values in the district broke through the 2 million-pound level for the first time.
By 8:30 p.m., Bubear’s deal was complete. Beating the deadline saved the buyer around 80,000 pounds, he said.
“We had to have unconditional exchanges by midnight,” he said. “Because the vendor could physically sit in the office with the solicitor, we were able to get the deal done within four and a half hours.”
Knight Frank helped its clients to complete 23 deals worth 2 million pounds or more yesterday, the broker said in an e-mail. The transactions had a combined value of 107 million pounds, compared with 15.2 million pounds on the same day last year. Savills advised on more than 50 million pounds of luxury-home transactions yesterday, according to Tracey Hayward, a spokeswoman for the London-based company.
Overseas buyers purchased three out of every five luxury homes sold in London’s best neighborhoods in the three months through Dec., 2011, according to Liam Bailey, a residential research director at Knight Frank.
“There’s the potential that it will skew the market more toward those wealthy overseas purchasers,” Paul Diggle, a property economist at Capital Economics in London, said by telephone yesterday. “There’s a large share of people who are home-grown, well-off residents who this will affect more.”