NatWest economist blames stamp duty for stalling London and SE markets

Ryan Bembridge

September 20, 2017

The rising cost of stamp duty is the main reason London and South East house price growth is stalling, said NatWest senior economist Sebastian Burnside (pictured).

Burnside reckoned the 3% stamp duty surcharge on second homes and investment properties as well as the ongoing reduction of mortgage tax relief are putting people off in and around the capital.

He clarified that Brexit and natural dips in the economic cycle are other lesser factors.

Burnside said: “The slowdown in house price growth that we have seen at headline level is almost entirely a London and South East phenomenon.

“If the UK averages were doing what the Northern and Midlands regions were doing there wouldn’t be very much to shout about.

“I think that stamp duty changes have to bear most of the hallmarks of having kicked this trend off.

“The reason for that is one in three transactions in London are caught by the additional home stamp duty tax versus less than one in four nationwide.

“We should have expected that to hurt the London and South East market.”

Across England and Wales house prices fell by 0.2% month-on-month and rose by 2.1% year-on-year in August, stats from LSL Property Services revealed this morning.

But looking regionally in Greater London prices fell by 1.4% on a monthly basis and by 0.7% from last year.

Burnside went on to say the housing market is currently much more two-speed than in the past regionally in house prices and house price growth.

House prices in London are 70% above the pre-crisis peak whereas those in the North West and North West are barely above 2007 levels.

London is also on the brink of having 25% more jobs than in 2007.

Burnside added: “In the aftermath of recession there was lots of discussion about balancing.

“Everyone from Mervyn King to George Osborne – all political swathes – looked at this as an opportunity to rebalance away from a dependence on growth from London and the South East, away from financial services into other areas, away from consumer demand into more investment and exports.

“And actually virtually the opposite has happened in every single field that people were focused on and that tells you something interesting about what’s driving growth. The success of cities – not just London, but London is the biggest and best example – of bringing together the modern economy and driving the UK economy to be an ever-increasingly modern service-based economy.”

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