Clock is ticking for buyers of £1m+ homes as they rush to save thousands before April's stamp–duty hike

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The Independent Online

April 2011 is fast becoming the Coalition's "Year Zero". As well as the public sector cuts due to change the economic landscape, there's a spring issue currently vexing agents and buyers alike – the stamp duty rise.

This levy is on homes priced £1m and over and the rate is set to rise from 4 to 5 per cent on 6 April. It doesn't look like much on paper and frankly, most British home-owners won't be overly sympathetic to these rich buyers and sellers. But as the duty equates to a £10,000 increase on a £1 million property – from £40,000 up to £50,000 due and pro rata from there on – it's exercising a particular tier in the market and taxing the ingenuity of agents.

Indeed, with one month to go, some are reporting a bit of a feeding frenzy.

"There's definitely a rush to beat the rise," says central London buying agent, Robert Bailey of Robert Bailey Property. "We've experienced one of the busiest starts to the year since we opened five years ago, as almost every buyer wants to complete prior to the increase," says James Pace from Knight Frank's Chelsea office. "We saw a 60 per cent rise in instructions around £1m in January and early February as vendors tried to sell before the duty," adds Peter Young, managing director of John D Wood.

One agent, Henry & James, has done a mailer campaign to encourage people to sell ahead of the stamp duty increase. "Many people are unaware of the change," says a spokeswoman. Others are using the rise as an opportunity for a bit of marketing. Home builder Banner Homes, with developments that contain several million pound properties, is emphasising their pre-duty availability. "We're telling buyers that £10,000 can be avoided if they complete on their new home before 6 April," says Piers Banfield, Banner's marketing director.

The prime and sub-prime gang are not going to be unduly affected by the increase – after all, they're rich enough to absorb the pain and the pound is still low for the international set. It's more the growing domestic market: namely, the many British buyers who find themselves in the million-pound bracket, whom one might characterise as the "squeezed upper middle".

"It's is as unfair as it is outrageous," thunders Malcolm Lindley, managing director of agents Fine & Country. "It's a £50,000 tax just for moving home. Remember, in some regions, these are often not mansions but the homes of middle class working families." Lindley's advice is to move quickly and, indeed, his colleague Colin Shairp, director of Fine & Country in southern Hampshire, has reduced two properties ahead of the hike, including Blendworth Manor House, Hampshire, the childhood home of former Olympic rower Matthew Pinsent, below, previously being marketed at £1.2m and now £1m.

One interesting factor is that the stamp duty change may help reveal the numbers of homes that are now over £1m, exposing the glut of property millionaires in Britain. As Peter Young of John D Wood says: "It will impact the property market in places like Wandsworth, where the majority of family homes are worth between £800,000 and £1.4m." The risk for agents is that there will be a £1m-effect, just as there was at the £250,000 and £500,000 stamp duty thresholds: namely, that it became rare for a property to sell just over the critical point. "Agents have always been sensitive to the impact of stamp duty thresholds because buyers are sensitive," says Dean Heaviside, director of Fine estate agents. "So the tax will have the same effect as the £250,000 ceiling for First Time Buyers last year – that is, it will create a dearth of properties priced at or just above the threshold." Heaviside claims that several of his £1m-plus sellers have accepted that the lack of a sale before 6 April will lead to them bearing the cost of the extra stamp duty themselves, rather than trying to pass it on to the buyer. So, how many £1m and over homes are there in the UK?

Lucian Cook, research director of Savills, has crunched the figures via the Land Registry from 2007 and, while such data has to be taken with a degree of caution ("The Land Registry tends to undercount sales at the top end," says Cook), the period 2007-2009 showed 17,900 sales of domestic property at or over £1m, although the latest figures from the HM Revenues and Customs show almost double that number, at 33,800. Whatever, it's a five-figure number and, as you'd imagine, London and the South East control this surprisingly buoyant market. London's Westminster dominates, then there's a knock-on effect reverberating along the "wealth corridors" that run from London into the Home Counties and the south-east. Indeed, 82 per cent of all £1m and more sales are in London and the Home Counties, with Hampshire and Oxfordshire showing a few percentage points more, augmented by a few million-quid clusters in prime second home markets like Devon's South Hams district, "lifestyle relocation markets" like Bath, the Cotswolds and Harrogate and regional wealth spots like parts of Cheshire, Gosforth in Newcastle and Clifton in Bristol.

At this point, some buyers might be asking: is there a chance for a deal? Well, yes. "Those vendors pitching their properties at just over the stamp duty threshold – say £1,050,000 – may have to realign their sights in order to do a deal," says Robert Pritchard, director of Smiths Gore in Stow-on-the-Wold.

"For properties well in excess of the threshold, meanwhile, we're expecting buyers to factor in the increase."

And if a transaction is already under way, there might be a war of attrition. "There's no doubt that if a completion is planned, buyers will be pushing to make sure that it happens before the deadline," says Nigel Mitchell from Knight Frank's Guildford office, who suspects that "the loser will be the vendor". Indeed, James Grillo, associate director Chesterton Humberts' country department, is expecting fewer properties to be valued between £1m to £1.25m with some to be negotiated below the £1m mark. This may well suit those leaving London for the shires. Also, as Richard Marsh, associate director of buying agent Property Vision, says: "Vendors who price their properties higher to sell in excess of £1m might be disappointed, particularly as banks and surveyors will not absorb the increase in stamp duty into their valuations."

The ides of April then, will see a net loss in the numbers of property millionaires.

Homes on the edge

Blendworth Manor House, Hampshire, the childhood home of former Olympic rower Matthew Pinsent, has been re-presented to the market at £1 million, after being marketed at £1.2 million. The reason being to prompt a sale before the stamp duty hike next month (02393 277277, www.fineandcountry.com).

Flat E, Oscar Court, Tite Street, Chelsea in London SW3, is pitched at £995,000 so will avoid the £1m stamp duty raise. Close to the King's Road, the flat has one double bedroom and the court is named after Tite Street's most famous resident, Oscar Wilde (020 7235 8861; www.henryandjames.co.uk).

This four-bedroom house for sale in Fernlea Road, Balham in leafy south London, costs £999,999 – a mere pound below the stamp duty threshold (ww.marshandparsons.co.uk).

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