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Stamp Duty may not be so bad after all, argues leading analyst

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.

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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.

  • Andrew Stanton CEO Proptech-PR    Proptech Real Estate Influencer

    I do not think anyone was stating that SDLT was a bad thing. The cause for concern is that successive chancellors have tampered with it, and other fiscal measure around the sales of property. And each time they do the housing market and the people who buy and sell suffer. From MIRAS, mortgage interest at source in 1988, when Nigella's dad announced the changing of rules which caused a gold rush of buyers, a huge spike in prices, followed by a cliff edge, nuclear winter and then a fall in house prices, to even the changes around buying a second home with an extra burden of tax being applied, which meant that in 2017 a new wave of buyers bought a second property to avoid the tax, inflating prices, and distorting the shape of the market. The present difficult situation imposed by Rishi, means that with seven weeks to complete a sale, the market is now moribund, with new vendors sitting on their hands and not entering the market in February, waiting to see which way the governmental wind blows. No one is saying no SDLT, and for sure no one is saying scrap it and have a tax that cuts across all property assets owned by a person; apart from think tanks in Whitehall, what is being said by 50,000 people in the real estate sector in the UK is - if a Chancellor wants to change something - and it relates to property - do it with an immediate date, as having a cut off date always causes a big reaction, followed by another sometimes negative reaction to the housing market.

  • Simon Shinerock

    Sorry Anthony, I disagree, it’s not an either or, it’s about getting the balance right. In my view, SDLT levels above 5% are inequitable and counterproductive. People benefit from mobility, so does the economy, penal levels of SDLT discourage mobility and force those who need it into renting. The best solution for the market is to strike the balance between revenue raising and transactions to optimise freedom and maximise macroeconomic returns

  • adrian black

    if PPT feels more affordable and over time raises more tax then it clearly meets the current needs of the country. Usage taxes are much effective than transaction taxes. PPT replacing SDLT will increase the number of transactions and market liquidity.

  • Steven Heath

    It's about affordability if your selling a £1m house you can afford to pay say £50k tax , but to just ask people to pay an amount each month on there living costs would be to much for most .

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