By Myra Butterworth For MailOnline Published: 02:27 EDT, 8 January 2016 | Updated: 02:26 EDT, 8 January 2016 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. Buyers purchasing a £2m property pay an extra £50,000 in stamp duty under the new system 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. How much tax would you have to pay on a home or buy-to-let? Mr Mead added: 'The significant drop in sales of £2m plus properties during 2015 shows the profound impact of the stamp duty changes. Tax revenues will have fallen sharply as a result, so we would urge the Government to consider lowering the higher stamp duty rates. 'Looking ahead to 2016, we are expecting the market to be split around the £1.5m mark. Property worth up to £1.5m could grow in value by as much as 5 per cent, but owners of any property worth more than £1.5m can expect a static year.' Other industry experts agreed that many buyers were deciding against a move due to the increased costs of stamp duty. Mark Harris, chief executive of mortgage brokers SPF Private Clients, said: 'While the vast majority of buyers were winners in terms of paying less stamp duty after the reform of the tax, those would-be buyers making higher ticket purchases were significantly penalised, frightening many off. 'More people are staying put and improving what they have in terms of adding extra living space, rather than suffer the extortionate cost of moving.' Advertisement
Following the recent stamp duty reforms , London property sales fell by 64 % in the last 12 months as the higher tax rates affect properties selling for more than £ ##50 m . According to Douglas & Gordon , property prices dropped 1.4 % ( £ ##5 ) in the prime area between Notting Hill and Chelsea during the past year . Ed Mead , Director of Douglas & Gordon states that the problem with this is that " when prices fall sellers do not put their properties on the market , causing paralysis in the market " . Although the new stamp duty changes affect those buying a multi - million property , it benefits 98 % of people who are paying tax on a new home .