BRITAIN’S housing market is inflated by tax rules, which push up prices, and is left vulnerable to booms and busts because of stamp duty, the European Commission (EC) warned in a report yesterday.
Transaction taxes such as stamp duty can cost buyers tens or even hundreds of thousands of pounds on each purchase, forcing them to hold on to property longer than they would like.
“Transaction taxes on properties tend to discourage transactions, which might ultimately make the market thinner and thus hamper the price discovery process,” said the report on taxes across the EU.
And the failure to update council tax in line with house prices also pushed up prices, the EC said.
“Failure to update the tax base regularly risks leading to erosion of the tax base — and thus revenue — over time, while giving further support to rising house prices,” the report said.
Solutions could include cutting stamp duty – which ranges from zero to seven per cent, depending on the sale price – and reforming council tax to make it more progressive and more in tune with the current housing market.