More Than 50% Of All First Time Buyers Now Pay Stamp Duty

According to the Council of Mortgage Lenders (CML) 56% of all people buying their first homes now pay more than the £125,000 stamp duty threshold for them. As property prices continue to creep ever higher this percentage can only go up. Surely this is just another blatant indication that the current stamp duty tax is outdated, unfair and negatively contributes to the affordability crisis faced by first time buyers in the UK today.

I’ve been thinking about this for all of 5 minutes since I read those statistics in the newspaper today, but let’s do some basic mathst: Approximately 1.5 million properties are sold each year, according to the CML around 35% of them are sold to first time buyers and 56% of these are subject to stamp duty. The average value of a first time buyer home in the UK is around £200,000 so we can assume that at the 1% stamp duty level the Government is raking in a monumental £588Million from first time buyers this year alone!!!!

Surely that’s wrong. Affordability has been the buzz phrase of 2006 and the Government has made so much noise about their HomeBuy scheme and just how much money they are putting into it to help our first time buyers.

Hmmm, the Government promised us £970Million in the 2006 budget to build 35,000 new low cost homes for their affordable housing scheme, but surely basic mathematics tells us that making first time buyers immune from the ravages of this tax would cost around half as much in lost taxes but would help almost eight and a half times more people.

This may sound a little radical, but at the end of the day we have a hugely outdated tax that has in no way kept up with the cost of the commodity it is taxing meaning more people now must pay more money to the Government whilst suffering from an increasing inability to afford to buy in the first place.

Whist we’re on the subject of stamp duty tax thresholds, is anyone else baffled by why stamp duty percentages go up in tranches? 1% for properties sold at £125k=250k, 3% for properties sold at £250k-500k, and 4% over this. Having such a slab like system has resulted in price ‘no man’s land’ areas. Because of this the price regions just below a threshold are filled with properties whose owners have found that they have no choice but to drop their price below the threshold to sell so are undervaluing their homes, but this also makes things more difficult for those genuinely at that price bracket to sell, as they do not seem as good value for money as properties worth thousands more than them that have been forced into that price range. The flipside of this coin in that there are also plenty of property owners that go the other way and are forced to avoid the ‘no man’s land’ by opting to overprice their properties. When compared with those properties genuinely in the same price bracket they do not stack up and what’s worse is that if they do find a buyer their mortgage lender is quite likely to down value the property and the sale will fall through anyway wasting much time and money on all sides. The problem is that if the property was put on the market at it’s genuine price the increase in the tax bill for the property being over the threshold will be almost as much as the value of the property over the threshold giving any buyer a nasty taste in the mouth.

Surely it would be fairer for everyone to pay a single percentage, I mean, the more expensive the property the more tax the Government will gain anyway because it’s a percentage after all.
If you combine the first time buyer immunity to stamp duty with a single percentage stamp duty tax for all properties with now lower threshold, then assistance previously aimed at first time buyers can be diverted to assisting families with housing needs to get a far fairer property market than the one we have today, but that’s just my opinion.