For the first time, at £257,120, the average price of a residential property in London is now above the £250,000 threshold at which stamp duty is paid at 3 per cent.
This means the average homebuyer in London would pay stamp duty of £7,714, compared with £1,535 five years ago.
More and more properties are falling into the higher thresholds (£250,000 and £500,000) which have not been updated for more than eight years. There are now six regions across the UK – the North West, West Midlands, East of England, South East, South West and London – where the average price of a detached house is above the 3 per cent stamp duty threshold. Five years ago, only London had an average detached house price above this threshold. In 2005, the average detached house price in London was also above the 4 per cent stamp duty threshold.
Three-fold increase in stamp duty
The total UK residential stamp duty tax take has increased three-fold since 1999/00 from £1.8 billion to £5.5 billion in 2004/05. Three-quarters of the rise in total tax take has been due to an increase in the amount raised at the higher 3 per cent and 4 per cent rates. These rates are applicable on properties valued above £250,000 and £500,000 respectively.
However, the Government made a positive move in last year's Budget to raise the lowest stamp duty threshold from £60,000 to £120,000, which has benefited many first-time buyers. Only 12 per cent of first-time buyer purchases were below the lowest stamp duty threshold in 2004. In 2005 52 per cent were below the lowest threshold.
Stamp duty take on higher bands grows £2.8bn
The revenue raised at the higher 3 per cent and 4 per cent rates has grown from £0.9bn in 1999/00 to £3.7bn in 2004/05. Of this increase, £1.79bn was raised on properties of between £250,000 and £500,000, a rise of 364 per cent on 1999/00. £1.01bn was raised on properties above £500,000, an increase of 246 per cent.
In London, 62 per cent of house sales (detached and semi-detached) occurred above the £250,000 threshold in 2005 – more than double the 28 per cent of sales above this mark in 2000. In the South East, the proportion has risen from 18 per cent to 43 per cent over the past five years. The South West and East of England also experienced big rises from 5 per cent to 24 per cent and 8 per cent to 29 per cent respectively.
All regions have seen a significant increase in the percentage of sales above £250,000 since 2000. Northern Ireland (4 per cent), North East (8 per cent) and Wales (10 per cent) have the lowest proportions of sales above £250,000.
Southern England accounts for bulk of stamp duty take
Almost two-thirds of the extra revenue raised over the past five years has been raised in southern England with London and the South East accounting for 40 per cent of the total.
The burden of the tax, however, has become more evenly spread geographically over the past five years with 66 per cent of the total revenue raised in southern England (London, South East, South West and East) in 2004/05, compared with 73 per cent in 1999/00.
London is the only region where the average price of terraced houses and semi-detached houses, £295,502 and £334,510 respectively, are above the 3 per cent stamp duty threshold.
Tim Crawford, group economist at the Halifax, commented: "The higher stamp duty thresholds have not changed in more than eight years, even though property prices have increased by 150 per cent over this period.
"More and more properties are falling into the 3 per cent and 4 per cent nets. As a result, the amount of stamp duty revenue raised on properties valued at more than £250,000 has quadrupled, from £0.9bn in 1999/00 to £3.7bn in 2004/05."
