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 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’email@example.com.
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