Stamp duty is contributing to the issues in the UK property market, according to a new report. Research by the London School of Economics and the VATT Institute for Economic Research says having to pay the duty on property sales is deterring buyers across England and Wales.
And they suggested reforming the system would encourage more people to move and help increase the rate of social mobility across England and Wales.
The researchers analysed the effect of stamp duty – known as UK Stamp Duty Land Tax (SDLT0 – on different types of household mobility. They concluded that older buyers in particular are put off selling up and downsizing by the prospect of paying stamp duty. The consequence of that is the supply of property is slowing up and that’s stopping younger buyers and those on properties of lower values moving further up the property ladder.
However, younger buyers are also deterred from buying property over £125,000 because they will have to pay up to 10 percent of the purchase price in duty.
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Claim duty is a tax that ‘hampers mobility’
The report’s authors – Professor Christian Hilber of the LSE and Teemu Lyytikainen of VATT – concluded that stamp duty actually reduces the rate of home moving by one in five.
Professor Hilber said: “The key message is that stamp duty hampers mobility significantly. It creates a mismatch and distortions in the housing market. Our analysis suggests that mobility would be 27 percent higher if stamp duty was abolished or replaced with an annual tax on the value of the property.
“If you are a young family and you have an additional child, you’ll need an additional room, but the stamp duty is discouraging this kind of move because of the additional cost and lack of available homes to move into.
“In a nutshell, stamp duty discourages the elderly from downsizing and young, expanding families from moving to move adequate larger housing.”
A spokesman for HM Treasury, which is responsible for collecting stamp duty, said the most recent stamp duty reforms, implemented in 2014, were done to help more people get on to the property ladder.
Getting clear advice on cost
Stamp duty is payable on all properties over £125,000, rising incrementally up to 10 percent any home worth more than £925,000. In this blog from Homeward Legal, we discuss the full effect of the duty on property transactions.
Talk today to one of our sales team for clear information on what stamp duty you would be likely to pay on a purchase. Our experienced, professional team can talk you through all the elements required for a successful buy and provide a no-obligation quote that will give clarity on the full costs of a move. Call now on 0800 038 6699 or start your journey to a new home with an online quote.