Stamp duty “dead-zones” have wiped over £260 million off the value of residential properties sold in the England and Wales since April 2012 at an average cost of almost £7,000 to each seller, according to property website Zoopla.co.uk.
Since April 2012, when the last changes were made to the levels of stamp duty charged on the purchase of a residential property, over 37,000 properties have been under-priced in order to avoid costly jumps in stamp duty and make them more attractive to buyers.
In an analysis of property sales since April 2012 , Zoopla found that the number of sales in the price bands immediately before a stamp duty threshold is significantly higher than the level expected, while the number of sales in the price band immediately after a threshold – the stamp duty “dead-zone” – is significantly lower.
This trend is particularly prevalent at the £250,000 level. The number of sales in the £250,001 – £265,000 price band was 60% short of the expected volume because over 25,000 sold properties were under-priced to keep them below the stamp duty threshold. At this level, one penny over the £250,000 threshold will add £5,000 to the buyer’s stamp duty bill.
Sellers whose property values fall in a stamp duty “dead-zone” are reducing prices by £6,990 on average. The total amount cut from property prices to keep properties in a lower stamp duty threshold is more than £260m since April 2012.
Lawrence Hall of Zoopla.co.uk, said: “The current stamp duty system distorts the market and prevents thousands of sellers from achieving the full value of their property when they come to sell. Over the last few years buyer budgets have been squeezed by low savings rates and the high cost of living and this has left buyers less willing to pay the extra stamp duty levied on properties just above stamp duty thresholds.”
“An alternative system which removes the distortions is possible without reducing the revenue received via the Stamp Duty Land Tax. While a graduated system of land tax will mean some buyers pay slightly more than they would in the current system, overall it will make for a fairer approach to taxing property and enable sellers to realise the full value of their home.”
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