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Government ‘should overhaul’ stamp duty to boost housing market

The government should slash stamp duty to help boost housebuilding and encourage people to buy their own homes, a new report has stated.

Stamp duty is the second most unpopular UK levy behind inheritance tax, and a gradual rise in rates has meant the average buyer in England pays £2,300 when they buy a property.

Think tank the Centre for Policy Studies (CPS) branded stamp duty a “tax on mobility and aspiration” and urged the government to raise the threshold from £125,000 to £500,000.

The report, drawn up by former No 10 housing adviser Alex Morton, proposed that a four per cent levy be charged on properties between £500,000 and £1m, and five per cent on anything higher.

Prime Minister Boris Johnson has supported the idea of stamp duty reform. However, uncertainty over the cost of the move, coupled with chancellor Sajid Javid’s decision to cancel his planned Budget on 6 November, has cast doubts on the tax cuts.

Stamp duty currently raises £5.1bn for the government. However, the CPS argued a reform to the tax would cost only £1.6bn due to the positive impact of increased transactions.

The report estimated that a one per cent cut in stamp duty rates would increase housing transactions by roughly 20 per cent, which in turn would lead to more homes being built.

Moreover, it stated that the cost of reforming the tax could be further offset by a new three per cent levy charged to foreign buyers snapping up property in the UK. The CPS also argued that stamp duty should be kept on commercial and buy-to-let properties.

“While the Treasury are right to be fiscally focused, they need to take into account the fact that stamp duty on homes has an impact on transactions, which means cutting this tax is cheaper than expected,” said Alex Morton, CPS head of policy.

“We propose mean a far more appropriate rate for the most valuable homes – and taking nine out of 10 people who just want to buy a decent home for themselves and their family out of the tax altogether.”

By James Warrington

Source: City AM

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Removing stamp duty would boost last time buyers

Nearly half of over 55s would consider moving if they didn’t face stamp duty, with a change therefore boosting sales to so-called last time buyers, new research suggests.

The nationwide study from independent equity release adviser Key found widespread support for scrapping stamp duty for last time buyers to encourage older home owners to downsize.

Around 15% of home owners aged 55 and over, the equivalent of 1.2 million people, say they would definitely consider moving if stamp duty was abolished for last time buyers while another 30% say not having to pay stamp duty would influence their decision to move.

Separate research among financial advisers found overwhelming support for scrapping the charge with 77% saying that they would back the move subject to terms and conditions.

‘While downsizing is an emotive issue, increasingly people are looking at how they find a suitable property to support their later life living needs. Whether it is adapting their current property or downsizing to something smaller and more convenience for family and services, all of these choices have financial implications,’ said Will Hale, Key’s chief executive officer.

‘Scrapping stamp duty for last time buyers would mean that those people who want to move would have one less barrier to overcome as due to the lack of suitable properties finding something in the right location can be costly. Indeed, we find that increasingly customers are using equity release to raise additional capital to buy their dream retirement home,’ he pointed out.

‘For wider society, this move would arguably not only mean more families could move into larger homes appropriate to their needs and the property market would receive a boost but would ideally be cost neutral as the increased number of transactions should cover any deficit,’ he added.

He also pointed out that stamp duty on residential transactions fell by 10% in the 2018/2019 tax year to £8.37 billion with part of the decrease due to stamp duty relief for first time buyers with around 218,900 first time buyers benefiting.

House owners buying again pay no stamp duty up to £125,000 but then pay 2% on the portion of the house price between £125,001 and £250,000 rising to 5% on the sum up to £925,000 and then to 10% on prices up to £1.5 million.

Source: Property Wire

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Moving costs reach record highs, led by rise in stamp duty

The average cost of buying and selling home in the UK has reached a record high at £10,414 or £24,585 in London, new research has found, a rise of 2% year on year.

It is higher stamp duty payments, up 4%, and larger conveyancing fees, up 5%, that are driving the cost of moving home, according to the annual study from ReallyMoving.

The research also shows that the costs for first time buyers have also risen, up by 2% year on year to £1,613.

Stamp duty now makes up some 44% of the total cost of a home move, rising to 65% in London. Those buying and selling, now pay on average £4,625 in stamp duty, based on the median property value, while conveyancing costs stand at £1,490.

Although varying significantly depending on the distance of the move and the volume of possessions transported, removals charges have also increased by 1% over the last year to £480 on average.

The cost of an Energy Performance Certificate (EPC) remains unchanged at £55, but other expenses have dipped slightly over the last year, such as a Homebuyers Report which now costs £408, a fall of 4%, and estate agent fees at £3,356 are down 1% as suppliers compete for business in a contracted market that has seen transaction levels fall 12.4% year on year.

Movers in London face the greatest cost of moving, with the upfront costs associated with buying and selling a home in the capital now at £24,585, almost 2.5 times the UK average.

With property prices in London following a downward trajectory in 2019, home owners are finding it harder to fund a move through growth in equity, therefore the high cost of moving is becoming increasingly prohibitive, the report says.

The South East, East and South West are among the most expensive regions for movers, with the East and West Midlands sitting in the centre of the table and Northern Ireland and the North East the least expensive locations as a result of lower house prices, enabling greater fluidity in the housing market.

Moving costs for first time buyers across the UK are considerably lower at an average of £1,613, due to the exemption of stamp duty for first time buyers on properties up the value of £300,000.

A 2% annual increase in overall costs has been driven mainly by marginal rises in removals and conveyancing fees. Yet higher house prices in London mean that first time buyers in the capital are typically paying £3,750 in stamp duty, bringing their overall costs to £5,684, some 3.5 times the UK average.

‘Home owners are having to dig deeper than ever before to fund a home move, with upfront costs reaching another record high in 2019,’ said Rob Houghton, chief executive officer of ReallyMoving.

‘Stamp duty charges may be fixed, but it is possible to make savings on other costs such as conveyancing, surveys and removals by shopping around online for the best deals and comparing ratings and reviews, as well as price,’ he added.

Source: Property Wire

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Chancellor urged to revisit stamp duty for landlords

The government is being urged to “do more” to ensure the housing market is able to overcome the impact of Brexit.

Online mortgage broker Mortgages.online is calling on the Chancellor to take further steps in his Spending Round to stimulate the market amid Brexit uncertainty, pointing to the buy-to-let market as the one that requires focus.

Stamp duty in particular needed revisiting it stated after a surcharge of 3 per cent was introduced for second homes in April 2016, closely followed by cuts to mortgage interest tax relief for landlords.

Paul Flavin, managing director of mortgages.online, said: “The increased stamp duty payable on buy to let purchases, and the removal of the ability to offset mortgage costs has put many investors off the property market, with a knock on effect of reducing the stock of rental properties.

“We would encourage the Chancellor to look again at the negative impact these measures have.”

He added that Brexit fears had helped create a general lack of confidence and depressed values, exacerbated by valuers being cautious.

Mr Flavin said: “We have two basic messages for the Chancellor. Relief for buy to let investors and measures to stabilise the economy with clarity once and for all on Brexit, are both needed urgently.

“The alternative is for a continuance of a depressed housing market which is healthy neither for the economy nor the government if an election is on the horizon.”

The call comes after research found a record number of landlords are planning to sell rental property in the next 12 months as their profitability has fallen for the third successive quarter.

Meanwhile yesterday (August 28) the government announced measures to make it easier for people to get on the housing ladder with Help to Buy.

Under the changes, which are taking effect immediately, people will be able to take out longer mortgages than the current 25-year terms.

The move reflects change in the wider mortgage market, where the number of first-time buyers taking out a mortgage of more than 30 years has doubled in the last decade.

Housing minister, Esther McVey MP, said: “We are determined to open up the dream of home ownership to the next generation and our Help to Buy schemes have already been used more than 500,000 times by families to get a leg up onto the property ladder.

“I want our Help to Buy scheme to work for homeowners so we are giving people the freedom and flexibility to take out longer mortgages, if it suits their needs.”

Mr Flavin said: “The extension to 35 years will help many borrowers as their monthly payments will reduce but the Chancellor will need to do more in the Autumn Statement on 4 September if the housing market is to overcome its Brexit blues.”

The government also announced reforms to shared ownership rules that allow homeowners to increase their share at increments of 1 per cent rather than the current 10 per cent.

Mark Hayward, chief executive of NAEA Propertymark, said: “We support thinking creatively about ways to help first time buyers on to the housing ladder and consumers will welcome the opportunity to increase their share of ownership more easily and to simplify the process by which they can sell their homes.

“Government must be careful of the unintended consequences that any changes to Help to Buy could have on the rest of the market as in many cases these are not properties that feed into the general market place but into a ‘cul de sac’ with no assistance to upward activity”.

The Treasury has been approached for comment.

By Jennifer Turton

Source: FT Adviser

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First-time buyers save £426m in stamp duty

The government is facing calls to extend first-time buyer stamp duty relief and increase access to the housing market as figures showed £426m was relieved since the exemption was introduced.

Statistics released by HM Revenue & Customs today (21 November) showed that in the most recent quarter 58,800 transactions claimed first-time buyers’ relief, bringing the total number of claims since the relief’s introduction to 180,500 – a monetary value of £426m.

The relief was introduced in November 2017 to purchases of residential property by first-time buyers for £500,000 or less and then extended in last month’s Budget to first-time buyers buying through shared ownership schemes.

The HMRC figures showed stamp duty transactions increased by 11 percentage points to 307,100 between the second quarter and third quarter of this year.

The latest transaction figures are 8 percentage points lower than those recorded in the third quarter of 2017 but this data was not directly comparable due to the devolution of stamp duty to Wales in April 2018.

But there were concerns stamp duty remained a “financial barrier” to those higher up the housing ladder.

Kevin Roberts, director at Legal & General Mortgage Club, said this was particularly the case for growing families looking to upsize or last-time buyers looking to downsize.

He said: “The changes in the Chancellor’s recent Budget were certainly welcome, however, if we are to create a housing market that is accessible to all we must do more for older homeowners by extending the stamp duty exemption.

“After all, encouraging movement higher up the ladder allows properties further down the ladder to be freed up, which could help lift the stagnated transaction market we have been seeing.”

Shaun Church, director at Private Finance, said the stamp duty exemption had arguably been one of the most successful initiatives at getting more buyers onto the housing ladder but he said it should not end there.

He said: “We urge the government to turn its attention to last-time buyers as too many would-be downsizers remain in their family homes unwilling to move due to the hefty tax bill they would incur.

“Encouraging these homeowners to move to smaller and more suitable homes would unglue the housing market, and unlock a supply of properties for prospective buyers further down the chain, helping to rebalance the supply of UK property in relation to demand.”

Source: FT Adviser

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Government should end stamp duty on certain properties RICS

Stamp duty should be cut on certain properties to rebalance the UK housing market and reignite activity, chartered surveyors argue.

In the Royal Institution of Chartered Surveyors (RICS) Market Survey nearly half suggested using tax incentives to encourage downsizing, while others said making changes to stamp duty and council tax would help thousands more young people realise their dream of owning their own home.

Abdul Choudhury, RICS policy manager, said: “It is not surprising that our professionals feel that residential property taxation is out of kilter.

“If we consider tax in terms of how they disincentivise certain behaviours, SDLT makes purchasing, moving and making more effective use of stock costly at a time when we need all these things. Council taxes, on the other hand are woefully out of date and are highly politicised.

“Any changes to the system of tax should be considered carefully, as they would have disruptive consequences that could negatively impact activity.

“Providing a stamp duty land tax exemption for downsizers could free up larger, underused properties; but will likely provide them with a market advantage over other participants.

“Similarly, replacing stamp duty land tax with council could increase house buying and selling activity; but increase day-to-day living costs at a time when occupiers are already facing higher bills.”

Over one in five thought tax incentives to encourage downsizing could see the existing housing stock distributed more efficiently, matching properties better to housing needs, and benefiting the entire housing chain, as well as addressing the  wider housing shortage.

RICS has long called on the government to incentivise downsizing, to no avail. One method suggested is to incentivise those with larger homes to move into smaller properties, by making them exempt from stamp duty.

This would bring more second hand properties to market, benefiting the entire housing chain, and addressing the UK’s wider housing shortage.

Secondly, a reduction or removing stamp duty and adjusting council tax rates to account for lost revenue is also seen as a viable option, by just under 20%.

Anecdotally, respondents suggested, scrapping stamp duty land tax would shift the burden away from the transactional phase and onto occupation, freeing up funds in the buying process.

Choudhury added: “However, given the state of the housing market, it would be prudent for the government to consider the cumulative impact current taxes are having on behaviour and determine what changes can create a more sustainable and vibrant property sector.

“We would therefore urge the government to undertake a full-scale review of the stamp duty land tax system – starting with what it hopes to achieve from this tax in terms of revenue generation, market fluidity or another objective.

“It is imperative that the government recognises that markets need time to adjust to alterations to tax regimes as inconsistency is not conducive to the stable market that buyers and investors need.

“Stamp duty land tax has seen a number of changes in recent years, with the market struggling to adapt to one change before another is introduced.

“Given that RICS professionals are front and centre of the residential market, we will be developing a critique of the housing buying tax options available to Government in the near future.”

Currently, it is estimated that the average first-time buyer requires over £33,000 for a house deposit, with figures significantly higher across the South East and in London.

Another recommendation was extending the government’s Help-to-Buy scheme past the current 2021 deadline, but only for first-time buyers.

And it was suggested the government needs to provide more funding to extend the supply of sub-market tenures and implementing a rental framework that links uplift to inflation.

Source: Mortgage Introducer

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Londoners pay four times more stamp duty than the rest of the country

Buyers in London are paying at least four times more stamp duty than the rest of the country at £27,232, an analysis by London Central Portfolio found.

Basic rate stamp duty paid by buyers in England and Wales, however, stands at £7,161 on average.

The most expensive 10% of properties contributed around 60% of all stamp duty receipt with greater London being the biggest contributor to stamp duty at about 39%.

Naomi Heaton, chief executive of London Central Portfolio, said: “Despite the continued rumble around whether the richest are paying their ‘fair share’, it is clear that they are the main contributor to stamp duty revenue.

“LCP’s findings indicate that the majority of the Exchequer’s £9.5bn tax take is being generated by the 10% most expensive sales and that buyers in London are paying 4 times more Stamp Duty than the national average.

“The government also needs to be careful with any further policies targeting landlords. Contributing a huge amount towards the Exchequer’s tax take, landlords have been under increased public and government pressure over the last five years.”

The Royal Borough of Kensington and Chelsea and the City of Westminster contributed in excess of £0.6bn.

The most expensive sale alone, at £90m for a leasehold flat in Knightsbridge Apartments, generated over £10m for the Exchequer.

As a whole, residential stamp duty receipts increased 1.3bn in 2017 compared with 2016, reaching a record £9.5bn.

However, this was largely a result of the new 3% additional rate stamp duty on buy-to-let property and second homes.

This tax alone generated one fifth of all receipts and excluding it, the stamp duty take falls back to 2014 levels at around £7.5bn. Overall, 43% of the tax take, at £4.1bn, was generated by buy-to-let investors and second home buyers.

Heaton added: “New lettings listings are now down 5% to February, according to a recent Knight Frank report.

“Reliance on the stamp duty take from second properties, which pay an additional rate of 3%, to prop up the market is therefore a dangerous gamble. Representing almost half of all tax take, any new deterrent could start eating away at the public purse”.

“Unless the government can start to stimulate property transactions again, which according to Land Registry have fallen 29% in England and Wales over the last decade, the outlook for future Stamp Duty revenues looks fairly grim.”

Source: Mortgage Introducer