http://www.mortgagesolutions.co.uk/mortgage-solutions/blog-post/2274136/is-stamp-duty-strangling-the-housing-market?wt.mc_ev=click&WT.tsrc=Email&utm_term=&utm_content=Is%20Stamp%20Duty%20strangling%20the%20housing%20market%3F&utm_campaign=11/06/13%2014.00%20Blogs&utm_source=Daily&utm_medium=Email

In my opinion, undoubtedly. As the article states, when house prices were increasing, stamp duty was simply “a cost of doing business” so was less grudgingly paid. The added problem we now have is that many additional areas of the country ie lower end of the market are now having to pay Stamp Duty (SDLT) as prices have increased to 125k.

In my opinion the worst aspect of SDLT is its unfairness & arbritrariness. It is not a graduated tax, unlike income tax. Currently at £250000 it rises from 1% to 3%. So, for the additional £1 in the sale price, there is an additional £5000 of tax to pay! There is only a small amount that you can mitigate by selling fixtures & fittings separately (speak to your solicitor first).

For a property whose estimated true value is £250k it will need to be psychologically distant from this SDLT threshold so it needs to be marketed at £280k. Most buyers wont even look to do viewings because they know its overpriced, and they add in SDLT of £8400… so they look elsewhere. The property needs to be advertised at £250k with a view to accepting a price even lower. Result; seller loses.

So, at £250k there is a market barrier. Properties will not be sold at £260k unless the seller offers to pay the additional SDLT, in which case both buyer & seller will benefit. However how many times have agents ever suggested or even done this?

This can be seen where I live in the Bournemouth area where much of the housing stock is priced between £190-£280k. Anything advertised at £280k you know is really worth less than £250k (there is also another local ceiling at £300k). As a refurbisher I dont want to be buying above £200k because after refurb costs, tieing up money for 6 months (3 months refurb & 3 months to sell if I am lucky) & taking a financial risk (properties will not continue to go up in price), because the stamp duty threshold means that I will not be able to sell above £250k my margin is approx £20k. Instead I will need to add further value eg an extension to take it above the psychological barrier of £280k, or just take a big risk & hope that I find a buyer at this price who will pay over the estimated market value. How long could that take?

Stamp Duty needs urgently reviewing; it is distorting the marketplace & preventing people from moving more speedily. But what does any Gvmt understand about marketplaces, supply & demand? The problem is that the Gvmt is bankrupt & they have to tax more to pay their escalating debts. As a result they will resist making changes to what they will see as a “cash cow”, which wont lose them votes.

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