A new report from a leading UK estate agency has called on the government to make radical changes to the stamp duty regulations in order to kick-start the struggling housing market. Countrywide wants the Treasury to abolish stamp duty on properties valued under £250,000, removing one of the major costs first-time buyers face when they buy a property.
So, is it time to change the way stamp duty works? Many experts think so.
Stamp duty is a major revenue generator for the Treasury. The tax raised £3.3 billion in 2009/10 and almost £7 billion at its peak in 2007/8. Recent figures from Halifax showed that the average stamp duty payment has risen from £955 in 2000 to £1,793 in 2010.
However, many experts believe it is now time to change the way stamp duty works. Grenville Turner, chief executive of Countrywide, has called for stamp duty to be abolished on properties under £250,000. Just 13% of the total tax take from stamp duty comes from this price bracket and Mr Turner believes removing the tax would stimulate the property market - particularly for first-time buyers.
And, the Mirrlees Review - a five-year investigation of stamp duty by the Institute of Fiscal Studies - also recommended changes. It said: "Properties are not held by the people who value them most, and its slab structure - with big cliff-edges in tax payable at certain thresholds - creates particularly perverse incentives."
Keith Osborne from whathouse.co.uk, believes it is time for the government to consider changes to the tax. He says: "With significant house price growth in that period, the vast majority of first-time buyers now find themselves in a stamp duty band. Research from Halifax has found that if stamp duty thresholds had risen in line with house price inflation since 1997, the £250,000 threshold would now be £600,000. This would mean that hardly any first-time buyers would face a stamp duty bill."
Recent evidence has shown that the property market can be stimulated by exempting lower value properties from stamp duty. Transaction volumes rose during the Government's recent first-time buyer stamp duty ‘holiday' and Osborne believes that incentivising first-time buyers has a positive knock on effect on the property market as a whole.
He adds: "Encouraging more first-time buyers leads to a rise in transaction values and this would benefit the Treasury by generating larger stamp duty payments further up the chain."