Wednesday, September 03, 2008

Stamp Duty Threshold Increase

Reaction has generally been negative to yesterday’s one year change to Stamp Duty, where the threshold was raised from £125,000 to £175,000, roughly the UK average house price.

Certainly, if this was intended as a means of kick-starting an economy heading towards recession according to the OECD then it won’t be having a great effect, especially in London and the south-east, generally considered the motors of the UK economy.

In London, the average house price is more than £300,000, nearly twice as much as the stamp duty threshold, so will presumably have minimal impact in terms of helping sales to go through.

Hopefully the outcome will be more positive in Wales where the increase will mean that more than three-quarters of house sales are now outside stamp duty. It’s an innovation that may well help not just first-time buyers but many young families looking to upgrade from, say, a two-bedroom to three-bedroom house.

If the government really want to make a difference to these groups of people, though, then they will need to make the threshold change permanent, not just a gimmicky one year give-away, and index link stamp duty to house prices.

The real problem, though, is that while a saving of up to £1,750 on the initial cost of a house is good, it’s no real help to either buyers or the market if mortgage lenders are asking for far more extra than that as a deposit.

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