Haart’s National Housing Market Monitor July 2014 has concluded that at the current rate of house price growth (10% a year) the buyer of an average UK home will be subject to a 3% stamp duty tax rate before the end of 2016.
This amounts to £7,500 – an additional £5,000 when compared to the 1% band – stamp duty for a home costing £250,001.
Paul Smith, CEO of haart, said: “If national property prices continue to increase at their current rate, the average price of a UK home will fall within the 3% stamp duty tax bracket before the end of 2016 – which means buyers forking out at least £7,500 on top of other costs when moving home. Where a property tips over into this 3% tax band, an extra penalty of at least £5,000 is incurred on any property priced over £250,001.
“Stamp duty bands have not moved upwards in line with house price inflation, a fact that successive governments have benefited from to the tune of £4.7 billion for 2012/2013. First-time buyers, who pay an average £154,645, have no relief as they are already in the 1% stamp duty band. The government, and the Bank of England, need to be careful not to overcool the market and by raising the stamp duty tax threshold could help keep the market fluid.
“The new Mortgage Market Review measures are having an impact, but the new affordability tests and stricter scrutiny are applied at an early stage which means that only realistic buyers are considered and unrealistic ones are filtered out of the process quickly. This explains the fall in buyer registrations by 1.8% annually UK-wide (really a fall in unrealistic mortgage applicants being able to progress) with no accompanying dip in average property prices or in annual UK sales. These are the first signs of the market undergoing a natural, cathartic process of self-correction.”