The real truth about stamp duty

Joe Pattinson, Newbury New Homes (Image: Archant)

If instead of buying a house in 2010 when the average price was £160,000 you had speculated on Bitcoins, which were then $0.08 you would have done quite well. By February of 2011 the Bitcoin was worth $1 and in July of that year were trading at $31.

They fell back to $2 in December 2011 but the roller coaster ride means that had you invested in Bitcoins rather than that three bedroom semi, each Bitcoin would now be worth (at time of writing) $16,653.34. That means, as near as makes not much difference, that you would be worth $2.7 billion dollars and it might be $3 billion by the time the paper goes to press.

So there can't be anything else to provide you with such an incredible return for doing so little, unless of course you are chancellor of the exchequer. When Gordon Brown came to office in 1997 the revenue from stamp duty was £625 million. Gordon had promised prudence so stealth taxes were preferred to income tax rises and stamp duty was raised year on year. After 10 years house buyers were contributing £9.958 billion in property tax.

George Osborne also saw the property market as a rich source of income and whilst there was a drop following the 2007 recession, stamp duty income soon soared, with rapidly rising rates to produce £11.766 billion in the last year. Property taxes now make up 9 per cent of the UK income, which is more than double fuel duty.

Some will have welcomed lifting the threshold at which stamp duty is paid by first time buyers to £300,000 in the last budget. However the average price paid by first time buyers is under £200,000 and that figure is distorted by the fact that first time buyers have to find £422,000 to buy a cupboard in London. So not much help for first most time buyers.

Direct and indirect taxes need to be raised to pay for services.

But they need to be thought through and the consequences understood. Whilst the burden is eased for first timers the cost for many wishing to trade up as their family expands can be prohibitive. The Centre for Economics and Business Research estimate that the cost of stamp duty has resulted in 146,000 sales in the last five years. By stopping second steppers from moving you cut down the number of properties available for first time buyers to choose from.

Cutting the supply puts upward pressure on prices. The size of the stamp duty bill also prevents many older people from downsizing cutting off the supply of family houses. On the positive side the government have said they will put an additional £15.3 billion into 'help to buy' and other schemes over the next five years enabling more people to buy a home with just a 5 per cent deposit.

Anyway, a reminder that Newbury New Homes opened their show house at Wendover Park, Rackheath recently. It was a great success. Houses may not have been quite the investment that Bitcoins and other crypto currencies have been over the last seven or eight years, but no one is saying 'As safe as Bitcoins' yet.

You can contact Newbury New Homes, sponsors of this column on 01603 520000 www.newburynewhomes.co.uk