Our MD, Alex Mackay, takes a look at the current property market and shares his thoughts.
“Our new Prime Minister Boris Johnson has recently shared how he plans to deal with the ever-discussed Brexit and his ideas about stamp duty. A month or so ago, he said he was considering raising the entry level for stamp duty from where it is now at £125,000, to the heady heights of half a million pounds. He is also considering bringing down the top rate property tax of homes worth more than £1.5 million from 12% to 7%.
“And it doesn’t stop there. There was even more radical thought thrown out there, that he might in fact switch liability from the buyer to the seller when it comes to paying tax on residential property sales. The question is how good an idea is it? My first thought is this would significantly affect the UK’s downsizers who would face having to pay the extra tax, which may otherwise have been earmarked for retirement. Equally, there has been much emphasis on ‘The Bank of Mum and Dad’ and the lack of first-time buyers able to get on the property ladder. They may consider it a fair price to pay in order to help the younger generation get started.
“The stamp duty potentially removed from transactions at less than half a million pounds would almost certainly benefit almost all of those trying to get started but it is important to look at more regular transactions too. If a young family is upsizing from their apartment (let’s say this is valued at £350,000), to a more substantial family home (say, £600,000), they would pay, under Boris’ plans (though to be confirmed), £7,500 in tax (based on a stamp duty rate of 1.25%) rather than the £20,000 which currently finds its way to the Treasury.
“However, whether or not our new Prime Minister makes changes to the stamp duty land tax, I would suggest that a review is needed. The property market has been stuck for some time now with stamp duty receipts falling by almost £1 billion last year. What gives us hope is that there may be some relief to the homebuyers – it’s been reported that Boris has referred to stamp duty as ‘absurdly high’ and, if he were elected, he would be looking to ‘reduce it’. The reality of reducing it would, most likely, stimulate the market, particularly at the bottom end which would then push its way up and through, increasing his much needed tax income from the housing market.”