New figures reveal that the stamp duty bill footed by first time buyers has almost doubled over the past 5 years.
The cost of stamp duty for first time buyers has increased over 82% in the past 5 years according to mortgage lender Halifax with first timers now paying out an average £1751 to cover this cost compared to £960 in 2002.
This steep rise is largely down to the fast paced growth of UK house prices over this period with the average property now costing more than £80,000 above its 2002 value.
As noted by Halifax chief economist, Martin Ellis, "Stamp duty has again become an issue for first-time buyers because the stamp duty thresholds have not kept pace with house price inflation."
And, as a result, first time buyers now pay stamp duty to over 99% of Local Authorities in the south of England with Londoners seeing a massive 364% increase in their average stamp duty bill. While only 42% of those in the north are currently required to meet this additional cost the number is growing rapidly.
The lowest stamp duty threshold currently sits at 1% for properties costing above £125,000, with higher taxation bands of 3% and 4% in place for properties valued £250,000 - £500,000 and £500,000+ respectively.
While these bands are a vast improvement on the £60,000 minimum threshold level in place prior to 2005 it is still not enough as over 50% of first time buyers will still need to pay stamp duty this year despite falling property prices.
Halifax estimates that should the government have raised the stamp duty threshold in line with property inflation since the last boom began in 1993, the lowest payable band would start £66,000 above its current value at £191,000, with the 3% band sitting at £720,000 and the 4% stamp duty threshold at £1,440,000.
Despite this huge discrepancy in a system that is helping to price first time buyers out of the market, the government is unlikely to raise the bar any time soon as stamp duty provides a significant source of income with projected figures for 2008 estimated above £7.6billion.
