Stamp Duty is the reason many young families are unable to move home – but what are the options?
THE burden of Stamp Duty weighs heavy on homeowners trying to get on the next step of the property ladder.
For Hollie Gregerson, 32, the high cost of the controversial tax means her growing family is unable to afford the more spacious home they need.
Some experts claim this is slowing down the property market and making the housing crisis worse.
Hollie, who lives in Hull with her family and runs her own money-saving blog , said: “I've got two children under the age of two and although we have room for the children, the stuff they come with is stretching our walls.
“We're keen to move to a new house before our kids start school, but our forever-home will cost £400,000, which means £10,000 just on stamp duty.”
Research from Lloyds Bank found that more than half of those still living in their first home said that they had planned on moving up the property ladder in the last 12 months but have been unable to do so.
Unsurprisingly, the most common reason these so-called second steppers consider a move is due to their current property being too small.
“There’s a lot of focus on the difficulties of first-time buyers but they are not the only ones facing challenges in today’s housing market,” said David Hollingworth, spokesman for mortgage brokers, London & Country.
“As first-time buyers graduate from their first homes to moving up the ladder, perhaps to accommodate a young or growing family, they can face similar issues as they did when buying their first place.”
Making the move to a larger home will typically require a big step up in property value and although some homeowners will have enjoyed some growth in their current property value that is not necessarily the case, especially if they first bought at the last peak.
“In any case, they may well have to find a bigger deposit as a second stepper and that may not be easy to do from savings alone especially when considering the additional costs of buying and selling property,” said Hollingworth.
The rate of stamp duty you'll pay depends on where in the UK you're buying a property.
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England, Wales and Northern Ireland have the same rates, Scotland uses different rate bandings.
Legally, the purchaser must pay the Stamp Duty land tax on their purchase.
The tax is calculated on the part of the property purchase price that falls within each band.
For example, if you buy a house for £275,000, the amount you will owe is calculated as follows: 0 per cent on the first £125,000 = £0.2 per cent on the next £125,000 = £2,500, 5 per cent on the final £25,000 = £1,250. For a total of £3,750.
How can Stamp Duty be fixed?
STAMP duty is a billion-pound revenue raiser for the Treasury, but critics say it is slowing down transactions and stopping first-time buyers getting on the property ladder. But can it be fixed? Here are some of the options.
A Stamp Duty cut?
An exemption or cut in Stamp Duty would make it cheaper for buyers to get on the property ladder.
There was a Stamp Duty holiday for first time buyers between 2010 and 2012, but it created a rush of transactions before the deadline, followed by a slump.
Incentives for older homeowners to move
Buyers need actual properties to move into, but current owners may still be holding on to their family home despite the kids leaving, or may have nowhere suitable to buy.
Lower the rates for everybody
Agents say the biggest slowdown in transactions has been in the £1million-plus market.
You may have little sympathy for millionaires, but this creates a blockage at the top of the market that affects the flow of transactions down the chain.
Lowering the rates for everyone could help speed up transactions.
Make sellers pay for Stamp Duty
Shifting Stamp Duty from buyers to sellers would mean first-time buyers pay nothing, while those moving up the ladder would have a lower tax charge.
This idea has been floated by Yorkshire Building Society as well as estate agents, but something would need to be done for downsizers who would end up paying more under the new system.
Leave Stamp Duty but increase supply
There is little point pushing up demand with all these incentives if there aren’t enough properties.
Surveyors say more homes are needed to keep prices down.
But what can growing families that require more living space do to overcome this challenge? Is there a way to make moving to a bigger home more affordable?
“Buying a property that needs refurbishment or development work is a good way to get the property cheaper and therefore reduce the amount of Stamp Duty required for the purchase,” suggested Mark Homer, co-founder of Company Progressive Property.
For many expanding families looking to upsize, property extensions are the answer.
It should add value to their existing house and helps avoid incurring costs such as Stamp Duty.
But, as The Sun Online revealed last week, the extra cost of adding an extension can sometimes outweigh the expected increase in a house's price.
Even in the few areas where it does add value, according to the estate agents Hamptons International, the gains can be minimal meaning many families are paying the price for more space.
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