Increasing numbers of reports suggest that the government will use next week’s Budget to confirm a three per cent stamp duty surcharge on the purchase of homes by non-UK tax residents.
The new surcharge – strongly hinted at by the government for many months – would be on top of existing stamp duty on a property, and on top of the current three per cent additional homes surcharge.
The Financial Times, citing well-placed sources in The Treasury, suggest this measure will be finally confirmed by new Chancellor Rishi Sunak in his first Budget on March 11.
Leading PropTech entrepreneur Neil Cobbold, who is chief sales officer at automated payment platform PayProp, says this new stamp duty will be welcomed by domestic investors who may see competition from their overseas counterparts diminish over the coming months.
“It’s likely to have the biggest effect in the capital, where the government estimates that one in eight new London homes were bought by non-UK residents between 2014 and 2016. The surcharge was previously mooted at one per cent but its increase to three per cent will certainly act as a deterrent” he says.
But Cobbold warns: “Tenants in large English cities could suffer in the long-term if the additional tax burden leads to a fall in overseas investors and subsequently the number of rental properties available” says Cobbold.”
He adds that while there has in the recent past been much speculation surrounding wider stamp duty changes, the government appears to have put those on ice.
“Stamp duty is a hot button for consumers and property professionals, so the calls to reform the system are always plentiful in the lead up to a Budget. Boris Johnson has previously said that stamp duty rates are ‘absurdly high’ so there could be changes later in his tenure.”
“In the meantime, property professionals and consumer groups will continue to lobby politicians to reduce the pressure. Reconsidering the three per cent surcharge on additional homes and the tax rates which affect the very top end of the market would be a good first step” he explains.
Richard Donnell, director of research and insight at Zoopla, also wantsa to see SDLT reform in next week’s Budget.
“It’s time for the Chancellor to turn his attention to the core housing market and review the price bands and five per cent stamp duty rate that covers averaged priced homes across large parts of London and the commuter belt. No government wants to cut taxes indiscriminately, particularly when losses could be high. However, any cut to the rate of stamp duty could stimulate much-needed marketed activity in southern England in particular” says Donnell.
Any bid by Zoopla and OnTheMarket to displace Rightmove as the number one portal in the UK is at best expensive and at worst futile according to a leading analyst.
Mike DelPrete – former head of strategy at a New Zealand portal and a long-standing analyst of estate agencies in the UK and the US – says Rightmove is an example of a company with what he calls ‘network effects’
By this he means dominant online forces such as Rightmove, Facebook, eBay, and Craigslist are enjoy network effects – being ‘the’ place that people want to be seen, or want their products advertised.
“Even if a new entrant’s product is objectively better, a smaller audience of potential buyers and sellers means an inferior consumer proposition. Sellers want to advertise to the biggest audience possible, and buyers want the largest selection possible” he says in his latest report on the state of portals worldwide.
Specifically referring to the UK landscape he says: “For all the cyclical uproar aimed at Rightmove over its ever-increasing fees, its traffic dominance shows no signs of waning. It remains the undisputed best place to advertise properties for sale, with Millions More Buyers than its closest competition.”
DelPrete says all three major UK portals reported higher January traffic than the two previous years but while Zoopla’s and OTM’s percentage gains may sound impressive, they are from smaller bases than Rightmove’s.
“Rightmove’s traffic lead over its next closest rival remains strong and fundamentally unchanged over a number of years, despite several companies attempting to challenge its dominance” he says.
And he adds that even after Zoopla’s $3 billion acquisition by private equity firm Silver Lake in 2018, and OnTheMarket raising and spending tens of millions of pounds to compete, Rightmove’s traffic dominance remains intact.
And DelPrete writes: “The evidence suggests that it is nearly impossible for a runner-up portal to overtake the leader. In fact, there is no evidence that the all-important traffic leadership metric between the top two portals can be budged even a small amount.
“Which begs the question: Why are upstart portals attempting to displace leading portals? OnTheMarket launched in 2015 to challenge the duopoly of Rightmove and Zoopla in the UK. It was founded by a broad consortium of traditional real estate agencies who didn’t appreciate the market and pricing power enjoyed by the existing portals.”
The analyst says there are similar scenarios in Australia and the United States.
He sums up his analysis this way: “Attempting to compete directly with a leading portal is at best expensive, and at worst futile.”