A cocktail of record house prices, HM Revenue and Customs HMRC’s record stamp duty earnings and plunging property transactions have left property chiefs calling for reforms.
Reworking the stamp duty, the tax put on residential properties over £125,000, could help rebalance the hot property market and runaway valuations, according to onlookers.
“Stamp duty has an impact on the level of economic activity in commercial property and residential markets, the tax can deter people from moving house and businesses moving to more suitable premises,” Director of Policy at the British Property Federation, Ian Fletcher, told City A.M. today.
“We saw how the stamp duty holiday stimulated the market last year and the wider economic benefits an active market generates are widely recognised.”
The tax can even push housebuilders and investors to bail out of deals in the build-to-rent sector, which faces a three per cent stamp duty surcharge, Fletcher continued.
HMRC received a record £18.6bn in proceeds from the levy between April last year and March, which dwarfed the £6.1bn in reported the previous tax year.
While the jump in stamp duty receipts was largely carried by soaring activity levels in the market – spurred on by the stamp duty holiday – with property transactions “dramatically lower” than a year ago, the market has been feeling the absence of the pandemic-era stamp duty holiday.
Tomer Aboody, director of property lender MT Finance, said on Tuesday: “Transactions are dramatically lower than the same month last year when the stamp duty holiday was in place… It’s therefore not surprising that we are seeing month-on-month growth in house prices due to reduced stock levels, increased competition and still low interest rates, although these are on the rise.
“Once again we need to ask: isn’t it time to rework the stamp duty model in order to assist the market, encourage more people to sell and contain pricing?”
The Covid-induced tax break had “distorted” the market and pushed prices higher, Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said last month.
“With average house prices still on the rise, the Treasury will continue to bring in billions, adding substantially to the cost of moving home,” he added.