A big consideration when purchasing a luxury property over circa a million pounds is that stamp duty can be punitive since the rules changed in December 2014. A new stamp duty rate of 10% for sums over £925,000 and 12% for any amount over £1.5M is now in force across the country. This has caused a large part of the market at the higher end to become “stuck” and gummed up with many realising that it will cost too much to move instead preferring to stay put, especially where interest rates and therefore mortgage payments are as low as they are. There are some opportunities opening up however for those willing to negotiate as a portion of the market has to sell due to a life circumstance or repossession meaning that reductions on properties at this level can be achieved.
Another way to beat the tax is to buy a property which is in need of large scale refurbishment or can be extended. As the stamp duty is only levied on the purchase price of the property and not on the cost of subsequent refurbishment or building works this will be much lower than the value of the building once refurbishment/ extension works are complete. You may therefore end up with a £1.5 million pound house upon which you have paid stamp duty at a rate equivalent to say an £800,000 house which would create a good saving. You may also create equity from the development of the building and you are likely to end up with a property which is exactly as you want it with the layout, fixtures and fittings to your specification. Targeting large properties which have been empty for 2 years or more will also reduce the VAT payable on building and materials costs to 5% instead of 20% too, a big saving at this end of the market.
It may also be an idea to retain a buying agent to help in the search for a luxury property. As a lot more money is at stake it is good to have someone who really knows the market on which areas are best to live in and the type of properties to avoid. They may also be able to get a greater % of the purchase price off the asking price and know where quietly marketed properties are available from people who need to sell quickly.
Specialist surveyors should be instructed on larger luxury homes too. I would recommend a full building survey as well as the more common mortgage valuation as costs can rack up if major works need doing on bigger properties. The results of such surveys can be used to negotiate the price of a property down should there be major issues meaning that you could obtain a better deal.
Mark Homer of Progressive Property