Stamp Duty Suspended Under £175,000
9 September 2008
There was some much-needed good news for the housing market last week, with the long-awaited announcement of a stamp duty suspension. To the surprise of some commentators, the Government's suspension only affects homes under £175,000, rather than covering all residential transactions. However, with the average property value across Strathclyde standing at £146,500 according to the GSPC's most recent quarterly price report, most people in west central Scotland will be able to buy their next home without any stamp duty being charged.
The tax has been suspended for twelve months with immediate effect, although that period of suspension may be extended depending on what happens to the housing market in the interim. The Government's hope is that by removing stamp duty on transactions towards the lower end of the market, properties will move more freely in the coming months, thus freeing up the rest of the property sector, which depends on the lifeblood of new and first-time buyers for the formation of property chains. With a diminishing number of mortgages available recently, the market has slowed at all levels, and the Government's stamp duty action is a belated response to the tough conditions, which are especially obvious in parts of England.
The figures on how much people will save are easy to calculate - stamp duty was previously payable at one per cent of a property's value between £125,000 and £175,000, so buyers of a home between these values can now shave up to £1,750 off the total cost of moving. Although the cost to the Treasury is expected to be around £600 million (with details of how this will be funded to be announced in the Chancellor's Autumn pre-budget report), the potential benefits are considerably larger, if a stamp duty holiday helps to bring some movement back into the housing market.
The Government estimate that half of all property transactions across the UK will now be exempt from stamp duty, although in Scotland that figure will be considerably higher, bearing in mind the historically lower house prices north of the Border. Ironically, a report by the Halifax, released last Thursday just hours before the Bank of England's decision on interest rates, showed that house prices across the UK had dropped to an average of £174,178 in the three-month period to August, just bringing them under the new stamp duty threshold. Those price falls are less relevant to the Scottish market, however, with big falls being seen in some of the more overheated sectors of the English market.