Not only is the surging London real estate market a boon for sellers and developers, it’s also giving the British government a huge tax windfall.
The average person in London has to pay a property tax bill of almost £16,000 ($26,000) when they buy a house, according to the latest government figures. This means that the tax bill—known as stamp duty—on the average home sale in the British capital could buy a whole property elsewhere. Such as an eight-bedroom house in Andalusia in Spain, at the center of a severe property slump. Or a plot of land near the sea in Fortaleza in Brazil. Or a family home in Phoenix, Arizona.
London’s mayor, Boris Johnson, said “stamp duty has become a tax on London.” In total in the year to April 2014, homebuyers in London paid a record £2.7 billion in stamp duty, which is charged at between 1% and 7% on any house sold in the UK for above £125,000. The average house price in London is £467,000 now—meaning an average of 3% is paid in land tax to the government for every house sold in the capital.
Still, this does nothing to dampen enthusiasm in the London housing market. The borough of Kensington and Chelsea contributed £444 million in stamp duty—more than twice what the whole of Scotland paid. One official at the British tax authorities described the amounts being raised as “phenomenal” and the recovery in the housing market “nuclear aircraft-sized.”
Quartz has tried to put the magnitude of the rise in the housing market in context before, noting the average London home gained enough value in the past six months to put a child through university and that you could buy three homes in Northern Ireland for the price of London house and still have some change. Perhaps the latter statistic shouldn’t surprise, given how far and fast the capital’s property prices are breaking away from the rest of the country.
In June, the latest figures available, 206 of the homes sold in London were worth more than £2 million—the threshold for the highest amount of stamp duty. According to the UK’s statistics office, homes in London are up 39.7% since the market’s peak just before the financial crisis, following a brief period where they stabilized. Meanwhile, prices in Northern Ireland have lost almost half their value since that point—though they are at least above their lows in 2013.