Date:3 October 2008 I Comments: 3 I Views:9,206

Whose idea was it to increase the Stamp Duty threshold in a vain attempt at ‘kick-starting’ the property slump?

Whoever it was, did much thought, planning and assessing of the potential outcomes take place?

Look at it from the eyes of a purchaser. If a house is seen on the market for £190,000 what is the likely offer a potential buyer would have made a few months ago?

Because the previous stamp duty threshold was £125,000 a sensible offer would not take this into consideration and would probably come in at about £185,000.

Now because of the new threshold, buyers are immediately offering £175,000 to avoid paying stamp duty.

In a climate where new purchases are down to frighteningly low numbers vendors are having to accept a sale price of £175,000 or do nothing.

A property owner with a house that was valued £190,000 who has no option but to sell either due to family size, cost of living or moving for work etc. will find themselves £15,000 worse off thanks to the new threshold.

Because of this people who are not in a position where they have to sell but just want to are likely to do nothing and this in turn means they won’t be buying in the near future which will only add to the slow down in new purchases.

In some circumstances buyers will be very fortunate and pick up a bargain but everyone else is likely to lose out.

People wanting to remortgage to raise capital for improvements or debt consolidation in these times when they need it most will consequently find their property valued very close to the new threshold because valuers use statistics of recent sales in the area for the basis of a valuation.

This therefore means less equity available to achieve the objectives and with more mortgage lenders reducing their ‘loan-to-value’ criteria it also means less products available in the mortgage market.

It would have made more sense to simply reduce the percentage of the stamp duty applied.

Stamp Duty was previously taxed at 1% for property above £125,000 in value, 3% for property valued over £250,000 and 4% over £500,000.

It should have been changed to 0.5% at £125,000, 2% at £250,000 and 3% for £500,000 and above.

That way, it would be cheaper for the buyer, it wouldn’t affect the sale prices of houses and the government would still get something for low value house purchases.

Wouldn’t that have made sense?

Category: Mortgages

Comments

  1. Whose idea was it to cut stamp duty?

    Presumably the same people who have now cut VAT, helping deflation get embedded into consumer expectations.

    As I just said on another post, you really can’t make it up.

  2. Moneybags

    I think it is a fantastic idea. We have saved nearly £1,800 and we pay far too much tax anyway in the UK. The way prices have doubled over the past 8 years the government have made an absolute killing especially on those houses sold for over 250k