First time buyers and property professionals breathe a sign of relief as stamp duty is suspended for the next 12 months.
With UK house prices continuing to fall, mortgages difficult to come by and interest rates remaining stubbornly high, the Government has finally come to the aid of Britain’s battered property market and axed stamp duty.
In an attempt to jump-start the housing market from 3rd September house buyers will now only be charged stamp duty when they buy property at a price over £175,000.
The news will also be welcomed by house builders, estate agents and associated property professionals who have seen housing transaction levels lower than those experienced during the 1990’s slump.
Mike Ratcliffe independent financial specialist and chief executive of Wolsey said "Transaction levels have now dropped to dangerously low levels that have not been seen in several lifetimes. The housing industry cannot sustain this level of trade. House builders are on their knees. If there isn't an improvement soon many will fold, as their cash flows will not be able to meet overheads and interest costs".
Shares in the property sector jumped on the news with house builders Barratt Developments, Bellway and Bovis Homes all rising strongly. Persimmon who earlier in the year laid off two thousand of its employees and put new builds on hold ended the day 10% ahead at 424p.
The stamp duty amnesty, which is set by the Government for twelve months, temporarily replaces the current UK land tax regime which starts charging house buyers a 1% tax for properties sold for as little as £125,000. For those with deeper pockets and able to buy property over £500,000 the Government grabs 4% which is not due to change.
Rate of Stamp Duty Land Tax for UK Residential Property
up to £125,000......................................0%
£125,001 - £250,000...............................1%
£250,001 - £500,000...............................3%
£500,001 or more..................................4%
Source HMRC 2008 (existing system)
The new system effectively ups the first stamp duty tier set at £125,000 to £175,000 and will relieve hundreds of thousands of home buyers over the coming year.
"This is part of a whole series of announcements to help people with the current economic difficulties that they face. We can't solve every single person's problems for them... but what they do expect from government is, where we can, practical help." says Communities says Secretary Hazel Blears Speaking to the BBC this morning.
With about half of all housing transactions under £175,000 families moving home will be £1750.00 better off under the new temporary system. The overall cost to the treasury is expected to be in the region 600m.
