So Budget Day is almost upon us and the Chancellor George Osborne is set to make a number of changes that will impact on the property market.
He has already confirmed that phase one of the Help to Buy scheme which offers help to buyers of new homes will be extended to 2020.
But he has been silent so far on Stamp Duty, the property tax which the whole industry would like to see reviewed. Many organisations from the Royal Institution of Chartered Surveyors (RICS) to the National Association of Estate Agents (NAEA) have called for changes, stating that it will help to boost the property market.
They both point out that it is a tax that is unfair and hugely expensive and that its slab structure is actually restricting home ownership.
It is indeed odd that on one hand the government is offering help to buyers via both phases of its flagship Help to Buy scheme but on the other hand it insists on keeping the hugely divisive Stamp Duty tax.
The NAEA believes that Stamp Duty in its current form distorts the UK housing market, acts as a barrier to first time buyers and therefore restricts the demand to build new homes. Help to Buy is a good temporary measure, but tackling the unfair and hugely expensive Stamp Duty is an achievable, long term and sustainable way to support access to, and mobility up, the housing ladder.
It is interesting that new research published today shows that the current system, last changed in April 2012 has resulted in many sellers reducing the asking price of their home to make it more saleable by having less tax due.
Research from property firm Zoopla suggests that over £260 million has been lost and 37,266 properties undersold as a result of prices being manipulated to avoid the higher rates of Stamp Duty.
In an analysis of property sales since April 2012 Zoopla found that the number of sales in the price bands immediately before a stamp duty threshold is significantly higher than the level expected, while the number of sales in the price band immediately after a threshold, known as the stamp duty dead-zone, is significantly lower.
This trend is particularly prevalent at the £250,000 level. The number of sales in the £250,001 to £265,000 price band was 60% short of the expected volume because over 25,000 sold properties were under priced to keep them below the stamp duty threshold. At this level, one penny over the £250,000 threshold will add £5,000 to the buyer's Stamp Duty bill.
Sellers whose property values fall in a Stamp Duty dead zone are reducing prices by £6,990 on average. The total amount cut from property prices to keep properties in a lower stamp duty threshold is more than £260 million since April 2012.
So just this one bit of research shows how the current Stamp Duty system distorts the market and prevents thousands of sellers from achieving the full value of their property when they come to sell.
Alternatives being suggested include graduated system of land tax. Yes, this will mean some buyers pay slightly more than they would in the current system, but experts reckon that overall it will make for a fairer approach to taxing property and enable sellers to realise the full value of their home.
Brendan Cox of estate agency, Waterfords, believes that Stamp Duty is the greatest structural issue within the housing market and a persistent hurdle for a full recovery. He also believes that a small tinkering will not be enough and that a substantial change is needed to make any kind of difference.
Many others believe that thresholds at the lower end of the market need particular adjustment as they clearly need bringing in line with the up to date value of property prices. One suggestion is that properties valued up to £250,000 should be changed to 0% and then a flat 2% on anything over this price. They add that although the amount raised from each property will go down overall it will even out due to the rise in transactions.
Whether Osborne will take heed of the arguments remain to be seen and it looks as if the industry will have to wait until Wednesday to find out.
Ray Clancy
Editor Property Wire
