London first time buyers face bills of £7,500+
The average first time buyer looking to purchase property in the capital now faces paying over £7,500 in Stamp Duty to the Treasury.
This compares to a national average bill for Stamp Duty of £1,500.
According to Halifax, the UK’s largest mortgage lender, the average cost of property bought by first time buyers in 2006 was £250,819. The rate of Stamp Duty charged on properties costing over £250,000 jumps from 1% to 3%.
First time buyers purchasing property in 12 of London’s 32 boroughs paid over £250,000 last year.
The figures are likely to prompt calls for the Government to review the Stamp Duty thresholds. Stamp Duty was originally intended to penalise the very wealthy, but almost all homebuyers now have to pay this tax, which kicks in at 1% on properties costing £60,000 and over.
In July 1997 the Government introduced the higher Stamp Duty thresholds of 3% tax on properties costing £250,000 to £499,999, and 5% on properties costing over £500,000. At that time, no borough in London had an average house price that exceeded £250,000.
By contrast, last year 12 boroughs did, including traditionally cheaper areas such as Hackney (£255, 967), Tower Hamlets (£250,527), Ealing (£250,527) and Kingston upon Thames (£254,369).
If the Government had increased the Stamp Duty thresholds in line with property price increases, the £250,000 and £500,000 thresholds would today be £680,000 and £1,350,000.
Martin Ellis, Halifax chief economist, said:”This is adding to the already considerable difficulties faced by people trying to get onto the housing ladder.
“We call on the Government to increase the higher thresholds in line with the increase in house prices since 1997 and to commit to index link all the Stamp Duty thresholds to house price inflation in the future.”