I often here politicians complaining about high property prices preventing buyers entering the market.
It got me thinking about why house prices are and have remained high. I read somewhere that if you are a First Time Buyer you need to be in the top 10% salary band! Unless you have a double first in advanced maths that’s probably not going to happen in your first proper job.
I have spoken before about other reasons that have contributed to the housing price boom (pre 2008) which were cheap money supply and restrictive planning but I think Stamp Duty hikes introduced by the previous government are also responsible.
At one time rates were simple; you paid 1% of the purchase price with an exemption for purchases up to £30,000!
Rates were then substantially increased from 1997 ranging from 1 – 3%, 1 – 4% and 1- 5% depending on the price band. Nobody complained as most people realised their property was probably increasing by about 10% a year. However, this tax (and let’s call it a tax not duty) has had in my opinion a very negative effect on the market as Vendors who might have considered a sale, looked at the cost and extended their home instead. There is also evidence that to cover the cost of this tax some buyers are adding it to their mortgage.
The difference in values between different types of property has been stretched resulting in less and less transactions taking place. This has had a major impact on mobility, first time buyers (the one group of people who need and are not being represented correctly) not being able to enter the housing ladder and cutting off supply generally.
It cannot be right that a large part of the cost of moving is dominated by the one thing not contributing to the process!
Cut Stamp Duty.
Here at Mackenzie Smith we think that a sensible rate(s) that should apply are;
- Up To £250,000 – No Stamp Duty
- Above £250,000 – 1%
- Above £1 million – 2%
What do you think?
As for me I am writing to the National Association of Estate Agents and asking them to start lobbying for change.
Ed Mackenzie Smith.