23 Feb

Stamp duty holiday benefits property market: Should the tax be scrapped?

Stamp duty holiday benefits property market: Should the tax be scrapped?

In March, the stamp duty holiday will finally come to an end, with people now facing the last opportunity to take advantage of going through estate agents to buy their first property without having to pay tax on a home which costs less than £250,000.

When the holiday comes to an end on March 24th, having run since 2009, it will have helped over 100,000 people get onto the property market, which they might not have been able to do in the past because of prohibitive costs.

Outside of the holiday, first-time buyers would have had to pay the same as everyone else when buying any property which costs more than £125,000. For a house costing between this minimum value and £249,999, buyers would need to pay a one per cent tax on the cost of the property. If they buy a home at £250,000 or above, then they are required to pay an additional three per cent of the house's value.

But just what effect has the stamp duty holiday had on the property market? And should the tax be scrapped as a way to boost the flagging property market in the UK?

According to Briffy.com's founder David Amstell, it is an "immoral tax", which was simply designed as a way for the government to make more money, and should be scrapped in order to boost the property market as soon as possible.

"It has got a bit out of hand, so they should bring it up to date. It is quite ridiculous that people should have to spend thousands of pounds that they do on stamp duty, just for the sake of buying a house. It is very bad," he added.

Could this be a possibility though? After all, the fact that people have been able to buy a house without having to spend on the tax has certainly let more people buy, so scrapping it would only increase the property market's standing. Council of Mortgage Lenders (CML) chief economist Bob Panell has even said that the fact the holiday is coming to an end, and people are consequently keen to tie up a deal for less money, helped boost the ten per cent increase in gross mortgage lending in January.

He went on to say: "The credit constrained environment we find ourselves in means first-time buyers will increasingly have to fund stamp duty from their back pockets so the end of the concession will have a real impact."

This was a fact which was backed up by the British Bankers' Association (BBA), when it reported that 38,092 mortgage applications were processed in January of this year, a fact that it attributes to people clamouring for a deal before the holiday ends, and strengthening the argument for bringing an end to the stamp duty as a whole.

It is estimated that, overall in the course of the two year holiday for stamp duty tax, 170,000 people have been able to buy property that they would not have been able to in the past because of the additional tax, which could have cost them over £2,000 extra on the cost of their home.

Santander reported that, in total, there was somewhere in the region of £319 million saved for first-time buyers who managed to secure a property throughout the duration of the exemption period.

And it was also announced last week by HSBC that some 89 per cent of all first-time property buyers who have purchased a home in the duration of the holiday have benefitted by not having to pay the tax. The eleven per cent who did not manage to makethe saving were those who paid more than the £250,000 cut-off for their property. Most of these were people buying property for sale in London, which is always going to be more expensive.

So, with the stamp duty holiday having had a significant impact on the overall lending in the property market, as first-time buyers flocked towards buying property in order to make themselves a saving, will this be the way to push for the end of the tax, and provide a subsequent boost for the property market to get activity and house prices rising again?ADNFCR-1222-ID-801301302-ADNFCR

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