Scottish Property News

Stamp Duty holiday helped few

The Treasury estimated the 12-month increase in the threshold at which stamp duty becomes payable from £125,000 to £175,000 would cost it £615 million in lost revenue when it first announced the scheme in September 2008. It later extended the scheme until midnight tonight.

However, the Council of Mortgage Lenders (CML) estimates the total cost of the scheme to the Government is likely to have been around only £356m during the first 12 months, rising to just less than £500m when the extension of the scheme is taken into account.

Almost seven in every 10 homebuyers in Scotland benefited from the stamp duty holiday during the third quarter of 2009. Overall, Scotland accounted for some 9% of “newly exempt” property transactions across the UK during the past year.

According to the CML, the proportion of buyers in Scotland exempt from paying stamp duty increased from just more than 40% in the third quarter of 2008 to just less than 70% in the third quarter of 2009. The figure includes properties valued at less than £125,000, which will continue to be exempt from duty.

A similar pattern can be seen in Wales, Northern Ireland and northern England, where average house prices are below the £175,000 mark. At the opposite end of the scale, London sees “much less benefit”, according to the CML, with only 17% of transactions in the capital qualifying for stamp duty exemption – although that proportion is up from 2% before the change in threshold.

CML senior statistician James Tatch said: “We may see some surge in activity at the end of the year as borrowers rush to beat the deadline on the stamp duty concession before it ends.

“This may bring the total benefit to consumers (and cost to the Treasury) nearer the Government’s original estimate, but there is no realistic chance of the Government ‘spending its budget’ on this.”

Stamp duty is charged at 1% of the property’s purchase price on homes costing between £175,000 and £250,000, although the threshold falls back to £125,000 from next year.

The tax is charged at 3% of the property’s price on homes costing more than £250,000 up to £500,000 and at 4% on properties above this level.

The CML said a graduated structure, under which the higher rate of stamp duty was only paid on the proportion of a property’s value that is over that threshold, would be an improvement on the current system.

Within Scotland, the benefit of the concession typically fell along an east-west divide, with home-buyers in Glasgow, where the average house price stands at £146,000, more likely to qualify than counterparts in Edinburgh, where a typical property costs more than £197,000.

Buyers and sellers in Dundee, where the average house price is just less than £138,000, are more likely to have been rushing to meet the deadline than those in Aberdeen, which boasts an average house price of £186,000.

Brian Main, property manager of Dundee-based RSB Macdonald, said: “Right up until this week there have been settlement dates squeezed in right before the deadline. We’ve seen a lot of purchases hurried along.”

Alastair Houlson, associate director of Rettie & Co, which predominantly handles high-end property, said the resumption of the £125,000 threshold could have a “food chain” impact on the market.

“From an industry point of view, it’s obviously not great at a time when the market has been on the rise for the past three or four months.”

That echoed warnings from the Royal Institute of Chartered Surveyors last month that the end of the stamp duty holiday could have a detrimental effect on areas such as Scotland, where the recovery is lagging behind the UK average.