Stamp Duty has had a bigger effect than Brexit on the London property market

Stamp Duty has had a bigger effect than Brexit on the London property market [Photo: designer491 via iStock]

In the run up to, and indeed after, the referendum to decide whether or not the UK should remain a member of the European Union (EU), one of the big worries is that the eventual Leave vote would spell disaster for much of the country's property market, and most of all in London. 

However, according to one company, the biggest problem that has faced the property sector in the capital in recent years has not been the Leave vote, but actually changes in Stamp Duty which have forced the price people have to pay for the most expensive homes ever higher. 

Over a year ago, then chancellor George Osborne brought about a change in the rules for Stamp Duty that saw it change from a fixed band system whereby the whole price of a house was taxed at one flat rate, to a style of taxation more akin to the way income tax is calculated, with varying charges for each portion of the value that sits within certain bands. 

While this made it cheaper for many people across the country to buy homes, thanks to the falling value of their Stamp Duty charges, there were those in Prime Central London who suddenly faced higher charges, with the most expensive homes being the only ones that saw Stamp Duty fees increasing. 

According to real estate firm Knight Frank, this has helped contribute to a fall in the rate of price growth in Prime Central London ever since it peaked at 8.1 per cent in the middle of 2014. And although Brexit has had an effect, seeing short term prices falling by as much as 1.5 per cent in prime markets since June, Knight Frank believes that Stamp Duty has actually been more problematic for the sector in the long run. 

"Despite the widespread media coverage devoted to the EU referendum and its potential impact on house prices, the primary factor curbing demand in prime central London remains Stamp Duty. The result of this two year slowdown is that vendors had already begun to adapt to the new pricing environment and in many cases Brexit has been a trigger to make overdue reductions to asking prices," said Tom Bill, head of London residential research at Knight Frank.