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STAMP DUTY SHOULD BE ALTERED AS THREE-QUARTERS OF FIRST-TIME BUYERS PAID THE TAX IN 2016, SAYS YORKSHIRE BUILDING SOCIETY

03 March 2017

  • Proportion of first-time buyers paying stamp duty last year up to 74% from 53% in 2006.
  • £125k threshold has remained unchanged since 2006 despite a 35% increase in house prices since then.
  • Making stamp duty a seller’s tax would remove this significant barrier to homeownership for thousands of first-time buyers.

Stamp duty is prohibiting first-time buyers and should be altered in the Budget on 8 March, Yorkshire Building Society, has said today.  

Latest figures show that in 2016, just a quarter (26%) of FTBs bought properties worth under the stamp duty threshold of £125k, down from 47% in 2006 (see fig. 1).

This means stamp duty was paid by an unprecedented 74% of first-time buyers last year, significantly more than the 53% paying the tax ten years ago. The proportion of first-time buyers able to find a home under the stamp duty threshold has almost halved in just a decade, as first-time buyers increasingly struggle to find properties under £125,000.

The stamp duty threshold was increased to £125k in 2006 to keep pace with house price inflation. The threshold has remained the same since then, despite the fact that the average house price has risen by 35% since 2006, bringing more properties into the stamp duty threshold.[i] To levy the tax against a similar proportion of first-time buyers who paid the tax in 2006, the government would need to increase the threshold to £175,000

Additionally, average wages have fallen by 1% in real terms over the same period.[ii]

Yorkshire Building Society has called on the government to reform the tax in this year’s upcoming budget.

The benefit of making stamp duty a seller’s tax as the Society has proposed is that it would eliminate the cost of the tax for first-time buyers whilst also helping those moving up the ladder.

With stamp duty being paid by the property seller, first-time buyers in the UK could save an average of £3,625, while Londoners could save £13,171. Similarly, those moving up the property ladder could save an average of £4,154 across the UK, and £9,762 in London.[iii]

Andrew McPhillips, Chief Economist at Yorkshire Building Society, said:

In its present form, stamp duty does not suit today’s housing market - it pushes up costs for those looking to buy, exacerbating affordability issues in a market where prices have vastly outpaced wage growth.

Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder. It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first-time buyers to purchase.

Although this would help to alleviate some of the effects of the housing crisis, it does not address the root cause which is the lack of supply. The government should implement the proposals in their recent White Paper and go further to boost housebuilding so that there are enough properties available for people to buy.”

John Stevenson MP said:

I have long been a supporter of changing who pays stamp duty on house sales. At present it penalises first time buyers and those aspiring to move up the housing ladder. I have and will continue to make representations to Government regarding such a change appearing in this year’s budget.”

W05-17

 

Fig 1.

Year

Number of FTB property transactions valued less than £125,000

Percentage of FTB property transactions valued less than £125,000

2006

188,800

47%

2007

143,800

40%

2008

76,600

40%

2009

79,100

40%

2010

78,500

39%

2011

75,900

39%

2012

83,800

39%

2013

96,800

36%

2014

99,600

32%

2015

89,000

28%

2016

88,300

26%

Source: CML Table ML7: Property valuations for new house purchase mortgages, UK

Please note: this data only includes those who bought properties with a mortgage. Cash buyers are not included.

During the time between 3 September 2008 and the end of 2009, the stamp duty threshold was raised from £125k to £175k. Therefore, the proportion of people who bought houses worth more than £125k during this time did not necessarily pay stamp duty. However, the figures show that 26% of FTB transactions were for more than £175k in 2009.

Additionally, from 2010 to 2012, first-time buyers did not need to pay stamp duty on properties worth up to £250,000.



[iii] Data is based on YBS mortgage customers to obtain an illustration of how the proposed RPST policy reform would affect them. Statistics from a 12 month period up to June 2016 broken down by region of the UK and whether the purchase was by a First Time Buyer (FTB) or home mover. 

 

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