Matthew Kaye, Director of Kaye & Carey comments on the increase in Planning Applications from individual homeowners in London.
Looking at the lack of stock and weighing up the cost of moving now that Stamp Duty Land Tax has been substantially increased, it is hardly surprising that homeowners are looking at extending their homes or, if planning consents allow, digging down to create more space.
Take an average 1,600 sq ft mews house in say, Clabon Mews, one of the best mews in Chelsea, valued at circa 2200 per square foot / £3,520,000. Assuming the house is in need of refurbishment anyway, the extra cost to the home-owners of digging out and fitting the basement to create an additional 550 sq ft should be in the region of £350,000.
If that home owner chose to move to a house with the work already done, it would probably cost £4,750,000 plus SDLT of £483,750. So, effectively, the cost of the basement is more than covered by the saving in Stamp Duty and the uplift in value is for the home-owners to keep for themselves – and it’s tax free if it their principal residence.
Stamp Duty receipts are known to have fallen by 12 per cent last year and with Land Registry announcing the number of properties sold in England and Wales for over £1m decreased by 21 per cent to 878 from 1,113 a year earlier, the situation is likely to remain. While the principle of abolishing the old ‘slab’ system was a good idea, the Chancellor set the levels too high and has well and truly shot himself in the foot.
Mortgages are more difficult to obtain after the Mortgage Market Review, so borrowers seeking lesser sums to pay for extensions, instead of upgrading to more expensive new homes, will probably find it easier so, that too, will have an impact.