The UK Stamp Duty Threshold Increase Chain Reaction

Tuesdays news that the Chancellor of the Exchequer increased the threshold on UK property purchases exempt from stamp duty from £125,000 to £175,000 (albeit for the next 12 months) has been welcomed to the extent that senior executives in Ireland’s banking industry are informally lobbying for the Government for similar measures in a bid to increase property market activity. So what are the implications of the UK’s new stamp duty change and will it really make a difference to you?

News whether or not Ireland will follow suite on its October 14th budget day, brought forward in response to current economic difficulties remains hotly awaited. The UK’s own stamp duty move will allegedly save UK home buyers up to £50k and simultaneously cost the Treasury some £600 million a year in lost tax revenues. The impact the tax saving is reputedly set to have across the country, throws up a varied outlook.

A quick glimpse at some key areas of the UK property market (courtesy of the RightMove August report) shows:

Greater London
The average house price in London has fallen just 3.8% over the last year and now stands at £379,162 which a clear demonstration that this governmental move is designed to target the mainstream UK population. Minimal (if any homes) in the Greater London region will benefit from the change thereby effectively increasing the North / South divide.

North Of England
The RightMove report shows that the average house price in the North of England has now fallen to £151,940 over the last year – down 5.2% year on year. The vast majority of Northern home buyers should enjoy a stamp duty exemption holiday.

Wales
75% of home sales in Wales were exempt from Tuesday with the average value of a home in Wales falling 5.9% over the last year, now standing at some £177,023. Being on the cusp of the £175,00 limit, the move should see many Welsh residents benefiting from the recent change with home sellers seeing many buyers reducing property prices in an attempt to save themselves tax.

A smooth political move by the Labour party, the stamp duty exemption is not only well targeted towards traditional supporters of the party but also deal with the UK’s hottest dinner table conversation, property prices.

Commenting on the move, property blogger, Chintan Mahida said, “In true UK consumer credit card spending style, the fact that any savings are effectively ‘on credit’ as the treasury shortfall has to made up elsewhere means the stamp duty exemption may well have its own economic implications in the longer term. As they say, the money has to come from somewhere!”

The news may be good for First Time Buyers in the UK, especially in light of the fact that The Bank of England kept interest rates at 5 percent for a fifth consecutive month, but should we in fact, like Ray Boulger blogging over at Charcol, be asking How much will the stamp duty cuts cost me?