Increased stamp duty has made house prices more volatile and reduced property transactions by as much as 500,000, according to research.
The study by the Centre for Economics and Business Research (CEBR) suggests yield from stamp duty on residential property has risen ten times from £675m in 1996/97 to approximately £7bn in 2007/08.
In addition, the CEBR, which claims a yield study done since Labour came into power in 1997 has never been done, says stamp duty was raised to 2% on higher value properties in 1997, 3% in 1998, 3.5% in 1999 and 4% in 2000.
The combination of higher rates of stamp duty and the impact of house price inflation on the number of properties falling into the higher rate bands has, CEBR says, turned the tax into a hugely profitable revenue earner.
And, as a result of Gordon Brown’s increases in stamp duty, housing transactions have run consistently below their levels during the 1980s housing upturn.
The CEBR study concludes: “As property prices rise in relation to incomes, one would expect demand to slacken and the upward pressure on prices to subside.
“But estate agents believe that a key factor currently sustaining house price inflation is that there is a lack of supply of suitable houses.
“Clearly part of the problem is the lack of new build – as a country we have been building about 60,000 fewer properties a year than would be necessary to stabilise the house price average earnings ratio.
“And this has been largely caused – as the Barker review has pointed out – by planning regulations and social housing requirements. But another aspect of the problem is an unwillingness to put existing houses on the market because of stamp duties.
“With housing accounting for 55% of private individuals’ net worth, introducing an additional element of volatility into the housing market through this tax is dangerous. If and when the housing psychology becomes negative, it suggests that the consequences will be unnecessarily severe.”
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