The Treasury has rallied revenues from pandemics caused by a sharp rise in property prices as a result of stamp duty Rishi Sunaka, which not only supported the housing market through Covid, but also caused an influx of transactions.
Official data suggests that house prices have jumped 20 percent since the start of the pandemic. In the meantime, stamp duty bands have returned to pre-Covid levels, meaning that most of the transaction is captured in higher tax bands when the property is sold.
The average property in Britain paid a stamp duty of £ 2,100 before Covid, but the property price boom drove it up to £ 3,800.
Higher property prices have helped, but the decision to extend the tax in recent decades has also made a lot of money.
In the 1980s, there was only one stamp duty zone with home buyers who paid a tax of 1 pc for real estate worth £ 30,000 or more. The average property price was just under GBP 26,000 in 1984, which means that most transactions were not included in the tax.
However, there are now four groups where home buyers are starting to pay a 2% rate from GBP 125,000 upwards.
This is well below the current average home price in the UK of £ 277,000 and disproportionately affects London and the South East, where the housing crisis is acute. The tax is 10 percent for properties over GBP 575,000.
Sam Robinson, chief researcher at the Bright Blue think tank, says: “We have seen that as a result of rising property prices, several properties have been pushed into new stamp duty groups.
“It simply came to our notice then. With buyers paying stamp duty, this is a worsening problem for people who want to enter the housing market. ”
Strict taxation of real estate transactions prevents the British from moving and – crucially – keeping them in houses of the wrong size, which deepens the housing crisis. Think tanks from left and right proposed the abolition of stamp duty, while the idea prevailed among some MPs on the back benches of the Conservatives.
“A tax on any activity tends to reduce the frequency of that activity,” says Scanlon of LSE London. “People who gain the most by avoiding it [stamp duty] there are people who live in big houses, people who live in valuable houses, people who live in London and the South East, so basically potential shrinkers. “
Economists believe that the housing crisis could at least partially alleviate if people could move out of unsuitable homes, freeing up supply.
Many older people live in houses with three or four bedrooms designed for families, but stamp duty discourages these so-called “empty nests” from being sold when their children leave.
Scanlon says this will prevent these features from being used “more effectively”. He argues that a major reform that would bring an annual property tax would help discourage people from staying in houses bigger than they might need.
“That would change the dynamics of the incentives, so you would basically pay to stay in your big house, but you pay less if you move into a small house.”
Robinson of Bright Blue adds that lifting the stamp duty would allow people to move more around the country, move for work and use the existing housing stock more efficiently.
The scrapping of stamp duty could help alleviate the British housing crisis, but few chancellors will be willing to give up such lucrative dairy cows.