Estate agent, Haart, is calling on the Government to cut stamp duty for first-time buyers after revealing the extent of the burden on the average London worker.
According to their figures, the average London home buyer now pays the equivalent of three years of income tax on stamp duty when purchasing a home.
The stamp duty stealth tax is unfairly hitting London and the home-counties the hardest, where house prices are on average £258,000 more than the rest of the country. Buyers in London are paying the equivalent of three years income tax for stamp duty, in comparison to the rest of the UK who pay on average the equivalent of just one year’s income tax.
Londoners’ raw deal means that in addition to paying a minimum £40,000 for a deposit, they are also paying a stamp duty bill of over £14,000. This is 600% higher than the average amount paid across the rest of the UK, despite the fact that the average London salary is only 20% more than the average UK worker.
Government stamp duty reforms over the last two years have done little to help buyers in the capital, especially first-time buyers who are at a significant financial disadvantage to getting a foot onto the ladder, in comparison to their cohorts across the country. This struggle is echoed through haart’s branch data which shows that there are 16% fewer first-time buyers in the capital registering to buy compared with last year.
Meanwhile, stamp duty income for the exchequer has reached an all-time high. HMRC pocketed £12.8 billion in the year to June 2017, which is £2 billion more than when the UK housing market reached its peak in 2007 prior to the financial crash. Haart urge the Government to stop their excessive profiteering at the plight of the aspiring home buyer.
Paul Smith, CEO of haart estate agents, comments: “Excessive rates of stamp duty are holding the London property market back. Potential buyers are faced with a financial burden far greater than the one experienced by past generations, and for thousands in the capital owning a home is becoming an impossibility.
Some first-time buyers across the country are able to avoid stamp duty entirely – £125,000 in some parts of the UK can get you a 3 bedroom terraced house, however in London the most this will get you is a 25% share of a one bedroom flat. Instead the typical first-time buyer London home sits within the third stamp duty rate band. It is wrong to penalise aspiring home owners and movers in London just because prices are so high and unless something is done about this we are at risk of seeing a mass exodus to other regions of the UK.
The Government so far has not been listening because they have become so dependent on the income from SDLT. But tactical interventions such as a stamp duty holiday for first-time buyers could make a massive difference without having to dig too deep into the Government’s money pot. Stamp duty is an impediment to social mobility as people become less likely to move, which in turn has an adverse effect on the economy. The Government must remember that home movers spend considerably on removals, surveys, white goods, carpets and furniture – all with added 20% VAT which goes back to the Treasury.
A cut in stamp duty should not be seen as sign of weakness but instead as a positive step that will get the market moving. All heads are turned to Philip Hammond and the upcoming Budget for the urgent fix needed to help millennials and the wider affordability crisis.”