Home truths: Stamping out uncertainty
PUBLISHED: 09:32 10 February 2015 | UPDATED: 09:32 10 February 2015
Nicholas Walker, associate partner at Strutt and Parker in St Albans, takes the property market temperature after the Chancellor's stamp duty reforms
How does the major reform of stamp duty taxes, announced and implemented by the Chancellor, George Osborne, in December, affect you? The new rates mean there is no tax on the first £125,000 of a property sale; two per cent on the amount above that to £250,000; five per cent on the next slice up to £925,000; 10 per cent on the next slice up to £1.5m; and 12 per cent on everything above that.
The new rate, paid as before by the buyer not the seller of a home, is more gradual, reflecting the new Scottish system, and it is predicted to benefit 98 per cent of buyers. Anyone buying a home for less than £937,500 will either pay less stamp duty or the same amount under the new rules, the Treasury said. The reform is predicted to cost the government around £730m in lost taxes.
Before the announcement, stamp duty was charged at one per cent on properties over £125,000, going up to seven per cent on properties over £2m. Mr Osborne describing this system as a ‘badly-designed tax on aspiration’, as a small rise in house price can lead to a large increase in tax.
This overhaul has been positive news for most buyers and sellers, who will save in some cases thousands of pounds. At the top end of the market above £1m, although buyers will be paying more, they should be relieved to know the new system removes the single thing the market hates most: uncertainty. In the long term, this is great news for the overall market and we advise sellers not to rush to change guide prices. This new clarity will stimulate the market from the bottom up and, as is ever the way, the market will find its own level.
The Office for Budget Responsibility expects the overhaul to trigger a small upward creep in property prices and sales of homes worth up to the £937,500 tipping point, and a small decrease in prices and activity above this level.
We are predicting a stable year with housing activity set to increase after the general election as more solidity arrives on the political and economic landscape, which in turn should allow confidence to grow. Strutt and Parker and its retained economic adviser Volterra are predicting a modest but steady five per cent UK house price growth in 2015.