Harris Lamb Blog – 21st Jan



“Scrap Stamp Duty on Houses”

21st January, 2011.
By Charles D’Auncey, Director, Commercial Agency
The Organisation of Economic Co-operation and Development (OECD) said last week that stamp duty on house purchases should be replaced by an annual property tax to ‘improve conditions in the housing market and economy’.  This suggestion is worthy of wider debate…

The route provides 27 miles of privately funded and operated highway from Coleshill in North Warwickshire to Cannock in South Staffordshire.  The road carried an average 47,592 vehicles on weekdays in the summer of 2010  and from my experience of the Toll Road, private cars form the vast majority of the traffic.
The M6 Toll Road was identified as an “M6 Relief Road” to alleviate congestion on the M6, which is something many people feel has not been adequately addressed and, with one way car tolls at peak periods of £5, this is something to be debated elsewhere.
From a property perspective the benefits have probably been more tangible than the traffic improvements.  The southern end of the Toll Road and the ‘T1’ junction close to J4 M6 coincided with some of the latter stage build projects at the Hams Hall National Distribution Park, a 430 acre business park which ranks as one of the best such employment parks in the UK.
Junctions T2 and T3 appear to largely function as commuter gateways for those living to the south and east of Sutton Coldfield from where national motorway access has improved considerably and the effect on house prices has been positive in these areas.
The access to Junctions T4 and T5 at Weeford and Lichfield has given a stimulus to residential and commercial property markets alike with possibly the biggest winner being the 300 acre Fradley Park, where some of the largest distribution buildings in the area have been built with more to come.  We are marketing the new Fradley Prologis Scheme with 70 acres and units to 700,000 sq ft available to be built and which will be on site shortly.
T6 Burntwood, a forgotten part of the West Midlands conurbation 10 years ago for business and for new build residential perhaps, has not quite been “transformed” but certainly “considerably improved”.
T7 & T8 and the Cannock access points to the Toll Road provided the catalyst that has helped to promote the former coal mining town into a first rate employment location.  Significant development of a cross section of employment type accommodation from offices to manufacturing and warehouse operations has bought vitality to Cannock which I think is largely due to the Toll Road passing the town’s doorstep.
For those drivers who still regularly sit stationary on the M6 between junction 8 and 10 bemoaning the state of the traffic and whether the Toll Road has done the job it promised, the tangible benefits are probably in property as much as traffic counts.  The commercial new build and viability of new schemes along the entire length of the Toll Road has been transformed since the road was built.
For the positive effects of the Toll Road you may look little further than the development and opportunity is has created alongside it.

The existing stamp duty rates on residential property are based on zero tax on purchases up to £125,000 and if you are a first time buyer this zero rated band goes up to £250,000 otherwise duty is 1% between £125,000 and £250,000 with the rate at 3% over £250,000 to £500,000 and 4% over £500,000. For those fortunate enough to spend over £1million, the bad news is that Stamp Duty rises to 5% from 6th April 2011.
With the average UK house price at £246,387 to September 2010, although only £183,522 in the West Midlands in the same time frame, stamp duty is a significant tax to consider that clearly impacts those moving house but also those considering developing residential schemes and particularly those which contain a significant element of houses priced over £250,000.
For Harris Lamb as a Practice, active in residential development from advising on planning applications to selling and acquiring larger sites and valuing those opportunities too, then its fair to say that in these continued times of restricted credit and scarce debt finance the removal of stamp duty on house purchases would be a real fillip to help increase development activity.
Whilst the removal of stamp duty on house sales only becomes relevant at higher levels of value it is a fact that on larger development schemes that developers build out a range of product from lower value and social rented, elements through to higher value executive housing.  It is also fair to say that developers profit is more significant and attractive on the higher value residential product and anything to help improve demand on higher value housing would have a positive impact across the whole of the residential market.
The OECD also made another significant comment that the hefty duty paid by home buyers in Britain dampened housing transactions and so limited worker mobility which it said is one of the factors in having a healthy economy.  The ability of workers to move to expanding sectors and regions is seen as crucial to a return to pre-crisis employment rates.
On a separate, but also a relevant, point for us the OECD urges planning reforms to unclog the shortage of homes in Britain and promotes a tax on vacant land to promote the use of empty properties.
Whilst reducing taxes; in this instance stamp duty, can seem counter productive to economic growth there are cases where tax reductions make sense and scrapping stamp duty on houses, at least temporarily makes sense.

Charles can be reached on 0121 455 9455 or via email: charles.d’auncey@harrislamb.com.
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