PropertyMania Posted January 18, 2017 Share Posted January 18, 2017 Although Stamp duty is charged to buyers, this diagram explaining the 'tax wedge' suggests the cost is incurred 50% from buyers and 50% by sellers. A hypothetical flat 10% stamp duty would result in a house worth approx £1,050,000 selling for £1m with the buyer paying £1.1m including stamp duty. How does this work out in the real world? Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted January 18, 2017 Share Posted January 18, 2017 I'm not sure that really applies a demand driven market like housing where the price is determined by buyers maxing out rather than sellers competing for custom. in this case the tax effectively eats into what buyers can pay and thus requires a corresponding price drop from sellers. Quote Link to comment Share on other sites More sharing options...
SpectrumFX Posted January 18, 2017 Share Posted January 18, 2017 6 minutes ago, goldbug9999 said: I'm not sure that really applies a demand driven market like housing where the price is determined by buyers maxing out rather than sellers competing for custom. in this case the tax effectively eats into what buyers can pay and thus requires a corresponding price drop from sellers. Since it has to be paid up front, and most people buy with leverage, it effectively reduces available deposits. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted January 18, 2017 Share Posted January 18, 2017 Since buyers tend to move ever 6 years, I dont bother and use this odious tax to pay 1 year of my rent. Quote Link to comment Share on other sites More sharing options...
rockdoctor Posted January 19, 2017 Share Posted January 19, 2017 On 1/18/2017 at 1:48 PM, TheCountOfNowhere said: Since buyers tend to move ever 6 years, I dont bother and use this odious tax to pay 1 year of my rent. Is that still true? I see people turning down jobs and suffering huge commutes to work after job changes rather than pay gigantic stamp duty bills. Similarly it now makes sense to do crazy things like dig out a basement floor under your house rather than move to a bigger one and pay a huge chunk of wedge to the govt and get nothing to show for it. I bought a flat in 1996 (£1200 stamp duty), sold it and bought a house in 2002 (£14K stamp duty). A move now would cost £54k in stamp duty just to change location (i.e. same price house as I am in). Ain't nobody got time for that. The only thing that would make me consider moving is not being able to find work at all. However that's why I chose to live as close to central London as my wallet and my wife could bear - it means that most jobs in my business are accessible from my current house. Stamp duty is a massive anchor stopping people moving around in search of work (well, in the home counties it is) Quote Link to comment Share on other sites More sharing options...
PropertyMania Posted January 19, 2017 Author Share Posted January 19, 2017 2 hours ago, rockdoctor said: do crazy things like dig out a basement floor under your house rather than move to a bigger one and pay a huge chunk of wedge to the govt and get nothing to show for it. I've always considered stamp duty a very inefficient tax vs annual LVT, but if it's actually increasing building through extensions, should we really complain? Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted January 20, 2017 Share Posted January 20, 2017 12 hours ago, rockdoctor said: Is that still true? I see people turning down jobs and suffering huge commutes to work after job changes rather than pay gigantic stamp duty bills. Similarly it now makes sense to do crazy things like dig out a basement floor under your house rather than move to a bigger one and pay a huge chunk of wedge to the govt and get nothing to show for it. I bought a flat in 1996 (£1200 stamp duty), sold it and bought a house in 2002 (£14K stamp duty). A move now would cost £54k in stamp duty just to change location (i.e. same price house as I am in). Ain't nobody got time for that. The only thing that would make me consider moving is not being able to find work at all. However that's why I chose to live as close to central London as my wallet and my wife could bear - it means that most jobs in my business are accessible from my current house. Stamp duty is a massive anchor stopping people moving around in search of work (well, in the home counties it is) I agree 100%. I paid in 2006 £2.4 k stamp duty 3 years ago I realized that to move up I would have to pay £10-15k at least so I got a loft conversion. Now if I wanted to move to an identical house I would have to pay £10k stamp duty. Stamp duty makes the market more illiquid and harms everyone - apart from loft conversion companies. It is also unfair why pay more tax because you move more? Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted January 20, 2017 Share Posted January 20, 2017 9 hours ago, PropertyMania said: I've always considered stamp duty a very inefficient tax vs annual LVT, but if it's actually increasing building through extensions, should we really complain? It discourages downsizing because you gain less money and you can't change your mind in the future because of transaction costs. Quote Link to comment Share on other sites More sharing options...
Greg Bowman Posted January 20, 2017 Share Posted January 20, 2017 (edited) 16 minutes ago, iamnumerate said: It discourages downsizing because you gain less money and you can't change your mind in the future because of transaction costs. Not sure it does above a certain point. say I sell a house for £1.2 million buy a place for say £800,000 stamp duty on that is £30k I am left with £370k to pay off mortgage perhaps or invest in some tax efficient vehicles. Relatively the only people who plan downsizing are people can afford to (as opposed are forced to ) and in my above example it's less than 10% of my freed up capital still not a bad deal especially as that is likely to be unearnt through HPI However going sideways similar house/price must impacted by Stamp duty because dead money effectively Edited January 20, 2017 by Greg Bowman Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted January 20, 2017 Share Posted January 20, 2017 5 minutes ago, Greg Bowman said: Not sure it does above a certain point. say I sell a house for £1.2 million buy a place for say £800,000 stamp duty on that is £30k I am left with £370k to pay off mortgage perhaps or invest in some tax efficient vehicles. Relatively the only people who plan downsizing are people can afford to (as opposed are forced to ) and in my above example it's less than 10% of my freed up capital still not a bad deal especially as that is likely to be unearnt through HPI However going sideways similar house/price must impacted by Stamp duty because dead money effectively But below a certain point it could do. I imagine that moving house has been reduced, but I can't find evidence of this. Certainly I will probably never move home because of it. Quote Link to comment Share on other sites More sharing options...
Greg Bowman Posted January 20, 2017 Share Posted January 20, 2017 Just now, iamnumerate said: But below a certain point it could do. I imagine that moving house has been reduced, but I can't find evidence of this. Certainly I will probably never move home because of it. I agree so in the mid band where the family houses are needed moving from 3 or 4 bed semi to an apartment would become marginal because of stamp duty so people don't Quote Link to comment Share on other sites More sharing options...
Dorkins Posted January 20, 2017 Share Posted January 20, 2017 (edited) Stamp duty was always a bad tax (paying the government to let you move house, wtf?) but in the past it only affected relatively well-off people. It's HPI that dragged tens of millions in the middle into its maw. If there is a significant drop in house prices the same may well happen in reverse. Given where UK wages are it's not hard to imagine the average house price eventually falling below the £125k threshold, and with the new banding system even people buying houses slightly above £125k would not pay much stamp duty. Edited January 20, 2017 by Dorkins Quote Link to comment Share on other sites More sharing options...
PropertyMania Posted January 20, 2017 Author Share Posted January 20, 2017 A relative reckons stamp duty hikes have increased cost of home extensions by 20% in Surrey due to rising demand. We could see potentially millions of bedrooms added to the housing stock through extensions. This is good, no? Quote Link to comment Share on other sites More sharing options...
PropertyMania Posted January 20, 2017 Author Share Posted January 20, 2017 57 minutes ago, iamnumerate said: It discourages downsizing because you gain less money and you can't change your mind in the future because of transaction costs. Must discourage upsizing for the same reason, especially as rates are progressive. Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted January 20, 2017 Share Posted January 20, 2017 1 minute ago, PropertyMania said: A relative reckons stamp duty hikes have increased cost of home extensions by 20% in Surrey due to rising demand. We could see potentially millions of bedrooms added to the housing stock through extensions. This is good, no? Yes and no, new homes provide a lot more space for the same amount of labour. Quote Link to comment Share on other sites More sharing options...
PropertyMania Posted January 20, 2017 Author Share Posted January 20, 2017 2 minutes ago, iamnumerate said: Yes and no, new homes provide a lot more space for the same amount of labour. Fair point, and i think unlike extensions, new builds are VAT exempt (but we all know cash in hand is widespread) Quote Link to comment Share on other sites More sharing options...
Greg Bowman Posted January 20, 2017 Share Posted January 20, 2017 18 minutes ago, PropertyMania said: Fair point, and i think unlike extensions, new builds are VAT exempt (but we all know cash in hand is widespread) But..with the neglect of providing proper infrastructure around new developments Schools, leisure facilities etc. Extensions tend to be more pleasing both from an aesthetic point of view and practically Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted January 20, 2017 Share Posted January 20, 2017 (edited) 4 minutes ago, Greg Bowman said: But..with the neglect of providing proper infrastructure around new developments Schools, leisure facilities etc. Extensions tend to be more pleasing both from an aesthetic point of view and practically Well saying that, if people have a loft conversion and more people live in the house, it does affect parking etc - speaking from personal experience. Also there are some really rubbish extensions out there - although a minority Edited January 20, 2017 by iamnumerate Quote Link to comment Share on other sites More sharing options...
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