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Bringing you news, views and analysis since 2013
Naomi Heaton LCP

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HM Land Registry stats should sound warning bells for Osbourne

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A slight growth in average UK house prices in Q2 2013 will bring good news to home owners nationwide but the quarterly statistics just released by HM Land Registry should set off warning bells for the Chancellor.

The price of all property in England and Wales has grown 1.3% this quarter to reach an average of GBP242,415. Encouraging, if not for the looming stamp duty crisis which London Central Portfolio (LCP) has repeatedly highlighted. Average prices are edging ever closer to the threshold at GBP250,000 where Stamp Duty leaps from 1% to 3% and a huge tax increase from GBP2,500 to GBP7,500. In fact, for flats, which represent 18% of the total market, the average price breached the threshold this quarter to stand at GBP250,101.
 
Transactions in England and Wales have seen a sharp increase of 26.6% since Q1. This could in part be due to increasing economic confidence with more availability of credit, stable interest rates, and Osborne’s flagship help-to-buy scheme. However, it is more likely due to seasonality as transactions dropped by 21.23% in the previous quarter and over the year, transactions have only witnessed growth of 1.16%.
 
As expected, the market continues to storm ahead in Prime Central London (PCL). Average prices grew 7.2% this quarter to reach GBP1,472,181. Transactions rose 11.64 % but like England and Wales, the annual increase is low at 2.22%.
 
The PCL ‘houses’ sector, notoriously volatile due to its tiny size and huge price diversity, put in an exceptionally strong performance. 230 houses were sold, a 33% increase on last quarter. The ‘top five most expensive sales’ in Q2 2013 were all houses located in PCL bringing the average price to a new high of GBP3,136,615.
 
Naomi Heaton (pictured), CEO of LCP warns: “Headline average prices in PCL are becoming increasingly distorted by increasing numbers of ‘super prime’ transactions. These top-end deals do tend to mask real average prices. In truth, 63% of all sales this quarter took place under GBP1m.”
 
Nevertheless, PCL is a tiny area of undeniably exclusive properties which represent less than 1% of all transactions. The stamp duty it generated last year was in the region of GBP400 million compared with GBP1.6 billion in England and Wales: in other words 25% of the Exchequers SDLT tax take. In the last quarter, the average tax take at GBP73,609 per property was 30 times higher than the GBP2,424 achieved in England and Wales.
 
Heaton says: “As the Exchequer has just claimed they cannot afford to raise the 1% stamp duty threshold above GBP250,000 to ease the burden for the average buyer, it seems economic logic to support the top end of the market which could so easily fund this relief rather than trying to dampen it. We should welcome top-end investment as a core plank in our strategy for economic recovery.”

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