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Homebuyers are getting licked by stamp duty
Daily Telegraph
Last Updated: 12:11am GMT 19/03/2008
In 10 years house prices have soared yet property tax thresholds have stayed
the same. Now one lender is calling for bands to be adjusted in line with
inflation, writes Myra Butterworth
How to get the best mortgage deal
The cost of moving home is escalating for many families, according to new
research. Homebuyers are paying more than a fifth of their annual salary on
stamp duty in almost a third of local authorities across Britain.
This is a significant rise on the position just five years ago, when
homebuyers in just 5 per cent of local authorities would face costs this
high when purchasing property.
This problem has occurred because stamp duty thresholds have remained
virtually unchanged, while house prices have risen sharply over the past
decade. As a result, there has been a dramatic increase in the number of
properties that now fall in the higher stamp duty bands, according to
Halifax, Britain's largest lender.
According to the bank the average homebuyer paid a stamp duty bill of 1,971
last year - equivalent to 7 per cent of average annual full-time earnings.
In contrast the average person buying a house in 2002 paid stamp duty of
1,211, just 5 per cent of average earnings.
The research found that the number of properties in the UK valued at 25,000
or more has more than tripled over the past five years, rising from 1.8m in
2002 to 5.5m in 2007. It is these homebuyers who pay significantly higher
stamp duty rates.
Homebuyers currently pay no stamp duty on properties valued up to 125,000.
They pay 1 per cent of the total value of their property on homes priced
between 125,000 to 250,000.
This rises to 3 per cent of the total value on homes worth 250,000 to
500,000, and to 4 per cent on properties valued at more than 500,000.
Halifax called for a rise in stamp duty thresholds to allow for the
increases in house prices.
Martin Ellis, the chief economist at Halifax, says: "A growing number of
homebuyers are paying the equivalent of more than 20 per cent of local
average annual earnings in residential stamp duty. This trend is most
prevalent in the south of England, but other parts of the country are being
affected as well.
"The higher stamp duty thresholds have not been altered since their
introduction a decade ago.
"We call on the Government to raise all stamp duty thresholds to account for
the rise in house prices over the past decade and to index for house price
inflation in the future."
The shadow housing minister, Grant Shapps, says: "Labour and Gordon Brown
have presided over falling home ownership and curtailed the right of
first-time buyers to own their home. The average first-time buyer now pays a
staggering 1,675 extra in stamp duty under Labour.
"We have repeatedly called on the Government to increase the stamp duty
threshold for first-time buyers to 250,000, so that nine out of 10 buyers
pay nothing."
He adds: "Gordon Brown and could boost the housing market by ditching HIPs
which are just another layer of expensive red tape strangling the home
buying process."
But a Treasury spokesman hit back, saying: "Contrary to this report, the
Government has significantly reduced the level of stamp duty paid by many
homebuyers.
"As a result of threshold increases made by the Government in recent
Budgets, five out of six homebuyers paid stamp duty of 1 per cent or less.
More than a third of all homebuyers will pay no stamp duty this year.
In the 2005 Budget the Government doubled the threshold for stamp duty to
120,000, taking 430,000 transactions out of Stamp Duty entirely. Last year,
the threshold was increased further to 125,000, exempting another 40,000
homebuyers each year from Stamp Duty.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/25/cmstamp25.
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