Stamp duty changes hurt UK property

It is properties in the £2m plus range that are seeing fewer transactions

Stamp duty receipts from home purchases in England and Wales have fallen an estimated 18 per cent since a sweeping reform of the levy, after tax cuts for most homebuyers failed to encourage more transactions.

Analysis of Land Registry data by Savills, the estate agent, indicates an 18 per cent drop in receipts in the first eight months of 2015 against the same period last year. The fall follows changes to stamp duty announced last December, which cut payments for 98 per cent of people buying homes. The reform introduced an incremental scale that rises to 12 per cent on the portion of the purchase price over £1.5 million (Dh8.3 million). “The cut in stamp duty for the vast majority of the market has failed to stimulate more market activity as was hoped, primarily given the impact of mortgage regulation that has restricted people’s ability to get on and trade up the housing ladder,” said Lucian Cook, head of UK residential research at Savills.

Land Registry figures indicate an 11 per cent drop in residential transactions in England and Wales from a year earlier in the first eight months of 2015. The numbers do not include all purchases, but provide an indication of trends, Cook added.

Stricter borrowing conditions were brought in with the Mortgage Market Review in April 2014, aiming to ensure that homeowners can afford their payments even if rates rise.

Slower rate of transactions

Meanwhile, estate agents have complained that higher rates of stamp duty on properties above £937,000 — the only segment where the tax has increased — have slowed homebuying in that market. But separate analysis by LonRes indicates the Treasury is on track for increased receipts from this sector, as the higher stamp duty rates compensate for fewer transactions.

Sales of London homes priced at £2 million to £5 million were down 4 per cent from a year earlier in the period from January to the end of October, but stamp duty receipts from that slice of the market were up 19 per cent, LonRes said.

Instead, it is a slower rate of transactions across the market as a whole that has cut into the tax take, said Cook. Overall stamp duty receipts, which include the tax on both commercial and residential property, were down 8 per cent from last year in the period to the end of August, according to figures from HM Revenue & Customs.

The fall of £580 million means the exchequer is set to receive £870 million less from stamp duty on property in 2015 than a year earlier.