The sale of expensive London homes has collapsed by two thirds following the overhaul of stamp duty, new figures have revealed.
Sales dropped by 64 per cent in the last nine months as the higher tax rates hit properties selling for more than £2m.
While the new stamp duty rates introduced at the end of 2014 meant huge savings for those buying cheaper properties, they had the opposite effect at the other end of the market. It means those buying £2m homes now pay an extra £50,000 in stamp duty.
This rises to an additional £150,000 for those buying a £5m home.
The extra costs have had a knock on effect on prices, according to the findings by estate agent Douglas & Gordon.
It said values dropped 1.4 per cent – the equivalent of £20,000 – in the expensive areas between Notting Hill and Chelsea during the past year. Prices in neighbouring areas have also been hit, dropping 0.6 per cent or £10,000.
Ed Mead, director of Douglas & Gordon, which carried out the research, told MailOnline: ‘While this may not seem significant for buyers of multi-million pound, when prices fall sellers do not put their properties on the market, causing paralysis in the market in these surrounding areas. It affects the whole market.’
The 64 per cent drop is based on sales during the nine month period last year compared to two years earlier when the former so-called ‘slab’ stamp duty system existed.
Under the previous regime, buyers paid the tax at a single rate on the entire property price. With the new system – which has been in place for more than a year – sees buyers pay the rate of tax on part of the property price within each tax band, in a similar way to how income tax works.
On introducing the changes in December 2014, the Chancellor George Osborne said the new system would benefit 98 per cent of people paying the tax on buying a new home, with a saving of £4,500 on a family home costing £275,000.
However, for those buying multi-million properties, the cost of stamp duty is now much higher.