Call to reform stamp duty
Stamp duty needs to be restructured if the housing market is to recover across the whole country, the Royal Institution of Chartered Surveyors (RICS) has said.
The ending of the stamp duty ‘holiday’, introduced in September 2008, could have a “detrimental” effect on house sales in those areas of the UK that have yet to experience a recovery, the RICS argued.
At the moment stamp duty of 1 per cent is charged on properties of a sale value of more than £125,000. That threshold, however, is about to rise to £175,000 as from 31 December when the duty reverts to its old levels.
According to the RICS, surveyors in the West and East Midlands, Wales and Scotland believe that they will see a drop in activity in 2010 following the end of the temporary stamp duty holiday.
In other areas, surveyors reported that the reversion back to the previous stamp duty rate will have little impact on the housing market.
In London and the South East, the stamp duty cut is not forcing more houses onto the market and will not lead to a drop in activity once the old system is re-introduced, the RICS said. This is because the average house price is well above that of the stamp duty threshold.
Similarly in the North, where the average price is well below the threshold at £116,051, there is less concern about the impact of the end of the stamp duty holiday.
Simon Rubinsohn, RICS chief economist, commented: “At the time of its introduction, we did question how great an impact this policy would have and judging by the fact that only surveyors in certain parts of the country are particularly concerned about the ending of the holiday, it could be said that some areas of the UK hardly even noticed the change.
“However the additional transaction cost is still a worry to many, particularly first-time buyers, and is a threat to the market in the areas of the country that are still seeing a weak price environment.”
But the RICS went on to argue that now is the time to rethink stamp duty.
The RICS said that it believes that, rather than simply reverting back to the old structure for stamp duty, the government should introduce a wholesale restructuring of the tax.
Specifically, the RICS favours moving from the current slab structure to a marginal system with no homebuyer paying anything on the first £150,000 of their new home.