The United Kingdom (UK) is considering raising the Stamp Duty Land Tax (SDLT) on properties priced below £250,000 from 1% to 3%, which has many citizens and experts petitioning the government to rethink the plan. The current SDLT has remained unchanged for 15 years and it’s argued that any increase will undermine the chance for a true real estate market recovery. Analysts point to the 7% SDLT charged on properties priced over £2 million and how the increase made last year drove down sales in that price bracket. For more on this continue reading the following article from Property Wire.
Around 80,000 people in England and Wales, 10% of the market, could find themselves paying three times more stamp duty this year as the average property price looks set to breach the £250,000 mark, it is claimed.
For these buyers, Stamp Duty Land Tax (SDLT) will jump up from 1% to 3%, an increase from £2,500 to £7,500 and it has resulted in calls for the government to urgently re-evaluate the 1% stamp duty ceiling which has remained unchanged for over 15 years whilst the average price of a house has increased three fold from £79,242 to £249,958.
When first introduced in 1984 an average priced property, which was then £29,106, incurred no SDLT and properties over £30,000 were subject to a 1% charge. In 1997, stepped bands were introduced and, despite property prices having increased, the point at which the tax jumps from 1% to 3% has remained at £250,000 ever since.
HM Land Registry shows that, despite a lacklustre housing market, 2012 saw the average property price in the UK rise 0.75% to £249,958. A similar slight increase would bring the average property price above the £250,000 threshold.
‘Should the band not be reassessed, there are two possible consequences. A bunching will occur at £250,000 which will prohibit the fragile recovery of the market, depressing house prices with the frightening prospect for negative equity and even repossessions. Home owners might also choose not to trade up,’ said Naomi Heaton, chief executive officer of London Central Portfolio.
She pointed out that it is reported that the government base their analysis on data from the Halifax and Nationwide, who together only represent a third of the mortgage market. ‘These are mainstream high street lenders whose analysis puts average prices well below the actual averages demonstrated by HM Land Registry. As such, the Chancellor might be completely unaware of the Stamp Duty knife edge which average prices are teetering on,’ she explained.
In the run up to the March Budget stamp duty will be high on the agenda. Rumours are circulating though that, rather than re-evaluating the £250,000 threshold, Chancellor George Osborne might increase stamp duty by 1% across the higher bands as an additional revenue raiser and populist pleaser.
In last year’s Budget a new band was introduced at 7% for properties over £2 million and this has resulted in the over £2 million sector seeing sales fall. The preceding year also saw stamp duty increase by 1% for properties over £1 million to 5%. Some think it could be easily increased to 6% and at the same time target properties over £500,000 raising the 4% band to 5%.
Last year, the SDLT rise in the £2 million plus sector resulted in a 30% collapse in transactions. London Central Portfolio calculates that a similar fall in transactions of properties valued between £500,000 and £2 million on the back of a 1% increase in Stamp Duty, would result in a net loss of £202 million in tax receipts over one year for an already beleaguered UK economy.
Such a move would be felt most in London where 45% of the transactions over £500,000 occur. Property owners in prime London central locations already pay their fair share, according to Heaton. ‘They contribute 27 times more Stamp Duty to the Exchequer on each transaction, paying on average £67,505 compared with £2,500 in the rest of the country,’ she said.
‘The Chancellor must move quickly to reassess the UK’s Stamp Duty situation. A recovery in the domestic property market will only be good news if the 1% stamp duty ceiling is also raised. For any buyer, finding an additional £5,000 is a big ask, especially in the current climate, and for first time buyers, it could be the difference between renting and owning,’ she explained.
‘The government should not continue edging up stamp duty percentages, as they have over the last 16 years, without taking into account rising property prices, inflation or the impact on transactions, which have fallen by 33% since 1997. The stamp duty regime needs to be carefully scrutinised in the context of accurate market data to avoid another snap eve of the Budget decision leaving the British tax payer with even greater financial burdens and a languishing property market,’ she added.
No comments:
Post a Comment