Over 40% of U.K. prime home buyers have scaled back how much they plan to spend on a new property after two consecutive sales tax hikes.
According to real estate consultancy Knight Frank’s survey of 500 prime buyers released Friday, some 41% have reduced their budgets. This figure rises to 56% for those buyers with a budget over £1.5 million (US$1.8 million)—the level at which the highest sales tax rate, or stamp duty, is applied.
At the same time, 14% of home buyers said that they would stay longer in their next property as a result of the unpopular stamp duty changes, increasing to 20% for those with higher budgets.
In addition to variations by price tier, there were also differences by age bracket. About 47% of those over 55 told Knight Frank that the stamp tax changes have had no impact on their budgets. This, though, could be attributed to nearly half of older movers looking to downsize to smaller properties.
George Osborne, the former U.K. finance minister, first slapped higher stamp duty rates on more expensive homes in December 2014 and made it cheaper on average for those purchasing homes worth less than £1 million.
This meant that the tax for a £6 million property, for example, jumped from £420,000 to £633,750, dampening demand at the top end of the market, especially in prime central London.
In April, demand for luxury homes was further weakened when an additional 3% surcharge was placed on buyers of second homes and rental properties worth more than £40,000.
“The wholesale reforms to stamp duty announced in December 2014, and subsequent introduction of a 3% surcharge for individuals purchasing additional properties, have succeeded in making buyers more price sensitive, and this has been factored into asking prices and offers,” said Oliver Knight, associate at Knight Frank Research.