For the last few years the market below £2m has been by far and away the most active in Prime Central London. During 2014 in particular, due to the ‘threat’ and coverage given to mansion tax, investors often looking to buy a number of units and invest many millions in London have aimed at picking up properties in the £1-2m bracket. These properties allowed them to save a considerable amount of money when they purchased, as they were charged 5% for stamp duty as opposed to 7% over £2m. The properties were also attractive at this level because it meant they would be exempt from mansion tax. It was and is still possible to buy a good two bedroom, two bathroom flat in Prime Central London for about £1.75-£1.85m.
This is the sort of flat that would be the perfect rental investment. It allows for capital growth up to £2m, and under the old stamp duty rules would be a no brainer.
However, the goal posts have changed. In fact, if you buy a property at £1.825m now and work out the stamp duty percentage on the whole price, you are being charged at 7.27%, a difference in real terms of £41,500 (and perhaps also an insurmountable psychological difference).
The new “£2m level” is now at £1.125m; this is the point at which buyers feel no difference, and anything under this, buyers will be saving on stamp duty.Back to News