PBI has put together some reactions to the much awaited 2014 Autumn Statement by Chancellor George Osborne.
Stamp Duty reform has undoubtedly been one of the major changes announced by the Chancellor as it could represent a considerable hike for those owning a property worth more than £2m.
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The new SDTL, encountering the mansion tax proposal, introduces marginal tax rates for properties. That means that instead of home buyers paying Stamp Duty at a single rate dependent on the purchase price, it will now be calculated on a tiered basis.
As for this change, it is calculated that those buying a home at £2m will pay £50,000 more under the new policy. Consequently, there are concerns the 12% stamp duty measure would penalise the London prime property sales.
Industry players and experts have had mixed reactions to recent announcement.
Stephen Rees, Real Estate Advisory at Coutts says he doesn’t see the change on the stamp duty having an effect on the super-prime market in the long run as the Stamp Duty Land Tax (SDLT) gets absorbed into the price.
"The news on stamp duty should provide a liquidity boost to the market for houses priced below £500,000. At the other end of the spectrum – houses in the over £10m bracket – the increased stamp duty will probably be absorbed in transactions and prices over time."
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By GlobalDataFor properties at around £2m, Rees expects concerns in the short term as SDLT starts to increase considerably. "This area is still perceived as the battle ground for any post-election mansion tax or reform of council tax rates. With the spectre of mansion tax or higher council tax still looming in my opinion, this might cause the £2m market to cool."
Guy Ellison, head of UK equities at Investec Wealth & Investment thinks the introduction of marginal rates of stamp duty changes will benefit the majority, although those at the top-end of the market will face a higher tax burden.
"From a market perspective this could weigh on the London-centric house builders and estate agents, for example Berkeley and Foxtons, whilst potentially favouring the more regional developers," he says.
However, Kleinwort Benson’s chief investment officer Mouhammed Choukeir thinks the new rules will, indeed, cause a further fall in London’s most prime properties prices.
He says: "Even before the Stamp Duty announcement, home prices in London’s most prime residential areas fell 0.2% in November versus the previous month, the first time in four years. The Autumn Statement will likely exacerbate that trend.
An early indicator of market reactions, says Choukeir, is the share price for Foxtons falling over 3% following the Autumn Statement.
On equities evaluation, he adds: "Although equity markets are more expensive today than they have been for the last few years, valuations are not overly stretched. Momentum for global equities remains positive and sentiment is currently oversold. We still believe that there is reasonable value in global equities, especially when compared to the other core asset classes. Nothing in the Autumn Statement changes that conviction."
deVere Group strategist, Tom Elliott believes that the change in Stamp Duty "smells like another ‘soak the rich’ attack".
"Increasing the personal allowance from 2015 to £10,600 further narrows the tax base and increases the percentage of voters who don’t have skin in the game, " he says.
On Stamp Duty reform, Charles Hutton, private wealth partner at the newly-formed law firm Charles Russell Speechlys warns:
"For many buyers, the issue is not whether they will be able to afford to pay a higher rate of stamp duty, but whether they feel the UK welcomes them. From an international perspective, buying British is a sentiment-based decision and sentiments can sour quickly.
"The Government takes great pains to attract overseas investment and spending – they should be wary of pushing international investors past their tipping point."
Kay Aylott of accountancy firm Reeves says the government appears adamant on reducing the "unfair tax advantages" that apparently benefit non resident and non domiciles.
"The increase in the level of the Remittance Basis Charge (RBC) announced will no doubt result in fewer non domiciles claiming the remittance basis of assessment and instead opting to be taxed on their world wide income.
"For non domiciles, who have been resident for 17 of the last 20 years they will see an 80% increase in the RBC to £90,000 per annum and for a 45% taxpayers their offshore income would need to be in excess of £200,000 in order for a remittance basis claim to be worthwhile."
Salman Ahmed, Global Fixed Income strategist at Lombard Odier Investment Managers, addresses to UK gilts’ holders saying so as long as gilt investors "keep looking outside the stall, things won’t look so bad".
"Remember it’s a global marketplace and that while the UK market stall is creaking under vast debts, the price of UK government bonds is set by what is happening elsewhere in the world marketplace: low inflation and interest rates unlikely to rise anytime soon."
Peer-to-peer lender, HNW Lending, warns that the failure to increase the Inheritance Tax thresholds (ITH) will mean more people have to take out loans to settle interim inheritance tax bills.
According to Ben Shaw, founder and director of HNW Lending, the IHT threshold, which hasn’t moved since 2009, has been "too low for too long."
"With house price inflation many families have ended up with estates valued way more than £325,000 but are ‘cash poor’ and unable to pay their tax bill and release the proceeds of their relatives wills’. Some 16,000 estates pay IHT a year, and we believe that a growing number of people are taking out loans to pay the subsequent bills."
