The Yorkshire Building Society has warned that stamp duty is prohibiting first-time buyers and is urging the Chancellor to change this in his Budget on 8 March.
Latest figures show that in 2016, only 26% of first-time buyers bought properties worth under the stamp duty threshold of £125,000, down from 47% in 2006.
This means stamp duty was paid by an unprecedented 74% of first-time buyers last year, significantly more than the 53% paying the tax 10 years ago. The proportion of first-time buyers able to find a home under the stamp duty threshold has almost halved in just a decade, as first-time buyers increasingly struggle to find properties under £125,000.
The Yorkshire says that stamp duty threshold was increased to £125,000 in 2006 to keep pace with house price inflation. The threshold has remained the same since then, despite the fact that the average house price has risen by 35% since 2006, bringing more properties into the stamp duty threshold. To levy the tax against a similar proportion of first-time buyers who paid the tax in 2006, the government would need to increase the threshold to £175,000.
Meanwhile, average wages have fallen by 1% in real terms over the same period.
The benefit of making stamp duty a seller’s tax as the Yorkshire has proposed is that it would eliminate the cost of the tax for first-time buyers whilst also helping those moving up the ladder.
With stamp duty being paid by the property seller, first-time buyers in the UK could save an average of £3,625, while Londoners could save £13,171. Similarly, those moving up the property ladder could save an average of £4,154 across the UK, and £9,762 in London.
Andrew McPhillips, chief economist at the Yorkshire Building Society, said: “In its present form, stamp duty does not suit today’s housing market – it pushes up costs for those looking to buy, exacerbating affordability issues in a market where prices have vastly outpaced wage growth.
“Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder. It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first-time buyers to purchase.
“Although this would help to alleviate some of the effects of the housing crisis, it does not address the root cause which is the lack of supply. The government should implement the proposals in their recent White Paper and go further to boost housebuilding so that there are enough properties available for people to buy.”
John Stevenson, the Tory MP for Carlisle, said: “I have long been a supporter of changing who pays stamp duty on house sales. At present it penalises first time buyers and those aspiring to move up the housing ladder. I have and will continue to make representations to government regarding such a change appearing in this year’s budget.”