The property market will only continue to slowdown unless Stamp Duty is properly reformed brokers have warned.
My Mortgage Direct claims the major barrier to recovery in the housing market is the 3% Stamp Duty threshold on properties of £250,000 and above.
Cath Hearden, joint director of My Mortgage Direct, says the recent increase of the lower Stamp Duty threshold has made negligible difference to first time buyers. She says reluctance or inability to pay the £7,500 levies on property worth more than £250,000 is also preventing many homeowners from moving up the property ladder and preventing the completion of property chains.
“We hear from many client who are unwilling to pay ten or twenty thousand pounds over the stamp duty threshold,” adds Hearnden. “That’s the cost of a great new kitchen or bathroom – they are looking at property under the threshold and keeping the cash for things they really need or want.”
My Mortgage Direct claims many homeowners are reacting to the barrier created by the Stamp Duty threshold at this level by pricing their properties at on or just under the threshold level in order to secure a sale.
David Hollingworth, mortgage specialist at L&C, says he has seen a similar number of cases where this is happening. “If you see a property on the market for £255,000 the it is likely the vendor does not expect to get the asking price but expects an offer to come in of £250,000 or just below,” he says.
My Mortgage Direct is calling for a tiered Stamp Duty system in which the tax would be calculated on the remainder of the property price over the initial Stamp Duty threshold of 1% in a similar way to which income tax is calculated currently.
“This system would be fair in our view, and ther is no doubt that a great number of homeowners would decide to upgrade to larger, more expensive properties if they knew they weren’t going to have to give away a large chunk of their equity,” Hearden adds.
Hollingworth adds: “This is nothing new. We have been calling for Stamp Duty reform for some time and if you want to be a bit more radical then a graduate Stamp Duty system would make sense rather than the big differences between the amount of Stamp Duty currently paid at £250,000 or £500,000. But while it is easy to say it probably is more difficult to achieve.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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