Stamp duty threshold doubles

Stamp duty threshold doubles

Gordon Brown went some way towards appeasing the property industry in his budget today. He announced that the threshold before stamp duty kicks in on property purchases is to be doubled from midnight tonight from £60,000 to £120,000.

Since 1993, people buying a property for more than £60,001 have had to pay 1% of the property's value in tax, rising to 3% for those over £250,001 and 4% for those costing more than £500,001.

Since those thresholds were set, house prices have risen by more than 150%, and with average house prices now around £160,000, the majority of homebuyers are faced with the tax.

Many in the property industry have lobbied for an increase in the threshold. Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA), said the chancellor "should be praised for finally responding to the overwhelming pressure from the housing industry to update the archaic stamp duty system", but added that a "real change to the thresholds" was long overdue.

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"Today's change will help in the region of 300,000 homebuyers and offers hope to many more first-time buyers, but it can only be seen as a first step in the right direction and will prove to be irrelevant to those trying to buy in London or the south-east.

"With average house prices across the UK now 150% higher than when the base level was last amended in 1993, a more significant increase in the minimum threshold to £150,000 and amendments to the higher thresholds was needed to make any real difference to the majority of homebuyers," he said.

"It is clear that the chancellor is unwilling to sacrifice the £500m that any major change would cost him in lost revenue. As a result, the current structure still penalises many first-time buyers and people on low incomes," said Mr Bolton King.

However, the move was criticised by some as being "regionally divisive". Miles Shipside, commerical director at the property website Rightmove.co.uk, said: "Analysis of 440,000 properties on the Rightmove.co.uk site shows that there are only 15% priced at below even the new threshold of £120,000. Just 2% of properties in London and 7% of properties in the south-east are on the market at less than £120,000, with many of those shared ownership or retirement properties. In the south-west, it is 10% and in East Anglia it rises to 16%." He added: "Other more northern regions of the country are the main beneficiaries, with a greater number of properties priced at below £120,000 - 23% in the West Midlands and in Wales, up to 32% in the north. Of course, once a property's price goes over the threshold, you pay stamp duty on the full amount.

"This change is likely to be seen as regionally divisive as it will help some people in regions like the north and Yorkshire and Humberside - and virtually no-one in London and the south-east. I think it would have been much fairer to waive or reduce stamp duty for all genuine first-time buyers, so that people in all parts of the country can benefit and get a little help from the government to get on the housing ladder," Mr Shipside said.

Elliot Nathan, product development manager at mortgage broker Charcol, said the move was a step in the right direction, but added: "With the average house price hovering around the £160,000 mark, it is hard to envisage that this raise in the stamp duty threshold will benefit huge numbers of buyers, especially those desperately trying to get on to the ladder for the first time where the average purchase price is around £130,000."

However, he acknowledged that the change would ease the financial burden for some, particularly in the far north where the average house price is £102,000, and said that he welcomed the move with caution.

"Raising the limit to around £150,000 would have been a much bigger vote-winner come May, and you've now got to wonder where the chancellor is going to reap this lost revenue from - this is something we'll be keeping a close eye on in the run-up to an election in May," said Mr Nathan.

The leader of the opposition, Michael Howard, said that it was because of Mr Brown's reluctance to increase thresholds in prior budgets that the property ladder had already gone "a step too far" for most first-time buyers.

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