A housing market analyst says stamp duty, for all its unpopularity within the property industry, may not be so bad after all.
In an article released over the weekend Anthony Codling argues that realistically there will always be some form of property-related taxation, especially when public finances are seeking to recover losses incurred because of Coronavirus.
He suggests an obvious long-term alternative to stamp duty is an annual proportional tax, based on a percentage of each property’s value; this has been proposed by various think tanks and politicians, highlighted in recent weeks as debate has raged regarding the possible extension of the current stamp duty holiday.
Codling cites a range of hypothetical examples of an annual proportional property tax - they range from 0.25 per cent of a home’s value to 1.5 per cent. These would be payable year on year.
“What is evident … is that the annual proportional property tax is much lower than the upfront lump sum payment required by our current stamp duty tax” admits Codling, in a blog on his PropTech website Twindig.
He continues: “The monthly property tax figures are certainly a lot easier on the eye than those of the much larger stamp duty lump sums, but there is a catch.The lump-sum is a one-off, the monthly payments are ongoing.
“At some point, the cumulative total of the monthly payments will outweigh the original stamp duty lump sum. The proportional property tax will be more affordable, but more expensive.”
Using his hypothetical examples, he says that for the average UK house costing £250,000 the cross over point - at which time the owner will have paid more in annual tax than in stamp duty - is six years with the annual levy at 0.5 per cent.
If the annual tax is 1.0 per cent the cross over post is three years, and it is just two years at 1.5 per cent.
Codling - who made his name after performing a scathing analysis of Purplebricks’ sales performance - goes on to show that the annual proportional tax would increase as house prices rise, making it likely to be an increasing annual levy.
His figures also suggest that as house prices typically rise more steeply than wages, the burden on the homeowner becomes even heavier.
“The proportional property tax, therefore, not only increases but increases at a faster rate than wages. The property tax will take up an ever-increasing share of your wages. Perhaps the upfront lump-sum stamp duty tax payment isn’t so bad after all” Codling concludes.