house for sale Home | Stamp Duty suspension welcomed for residential property to £175,000

Stamp Duty suspension welcomed for residential property to £175,000

02 September 2008

Shoosmiths partner and head of direct conveyancing David Parton says suspending Stamp Duty on homes up to £175,000 will be welcomed by home buyers.

Chancellor Alastair Darling has announced that buyers of homes up to £175,000 will be offered a Stamp Duty ‘holiday’, in an effort to re-energise the residential housing market.

The move should hopefully end recent market uncertainty created as home buyers waited to see what the Chancellor would do to alleviate their tax burden.

It is anticipated that the benefit will come into immediate effect, and will help all transactions where contracts are completed on or after 3 September 2008. The suspension, which primarily aids homebuyer’s in the £125,000 to £175,000 property value bracket, is believed to be set to last for at least 12 months.

The band rate for tax at 1% will now start at £175,000. The higher band rates of 3% on properties purchased for more than £250,000, and 4% for properties purchased for over £500,000, remain unchanged.

One side effect of the benefit may be to depress properties on the market valued between £175,000 and £200,000 due to the step rise from no duty to over £1,750 duty on properties valued just above this new threshold.

It is also inevitable that the suspension will benefit fewer people in higher property price areas such as the south east of England than in areas where average property values are lower.

The last time a government suspended duty was under the Conservatives in 1993, when the nil rate threshold was suspended to £250,000. The 1993 suspension benefited the majority of the national housing stock at that time, whereas this new suspension will benefit a smaller but still significant proportion of buyers. First time buyers will certainly be helped.

Whether this stimulus will have any measurable impact on the currently depressed volumes of transactions will become apparent in the coming months. There remain challenges to buyers from lenders cautious to loan more than 75% of the value in the current market, leaving first time buyers still needing considerable savings (which most do not have) to get onto the property ladder.

There are other measures being considered by the government, including interest free second loans to help bridge the gap between current lending criteria and property values.

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