A hike in stamp duty is the biggest concern for the industry as it anticipates Gordon Brown’s forthcoming Budget.
So far the Chancellor has increased stamp duty in every Budget since coming to power and this trend is expected to continue as the Government moves towards indirect taxation.
Michael Bolton, marketing manager at Future Mortgages, believes that hikes could be substantial.
He said: “It could bring the top level banding up to 5%.”
Richard Verdin, marketing manager, housing markets at Legal & General, agrees that stamp duty is an obvious target for the Chancellor.
“Tax on property is cheaper compared with the costs in Europe and so tax-wise current levels will look relatively cheap in the UK,” he said.
But Ray Boulger, technical director at John Charcol, said that substantial hikes were unlikely, particularly on lower priced properties as the Government prepares to win support ahead of next year’s election.
He said: “Political expediency dictates that it does not increase stamp duty on properties below £250,000.”
To further restrict the tax burden on lower priced properties, Boulger added that he would like to see the duty-free limit of £60,000 raised to £100,000 as the cost of housing has risen.
The CML has called for a revision in the way the tax is applied, whereby higher rates are only charged on excess values over thresholds to help borrowers buying lower priced properties.
Peter Williams, deputy director-general of the CML, said: “Stamp duty has been increased in the last three Budgets. Already its costs may be deterring people from moving house, which is at odds with a modern economy based on a flexible and highly mobile workforce.”
The possibility of VAT on new housing has also become an issue. Boulger said: “There is a suggestion that VAT could be applied on all new properties between 5%-7%.”
Bolton favours this approach as it would help prevent further development of green field sites. “VAT on new houses is a good idea. The market is overheating, so we should not encourage new builds on green field sites but conversions on brown field sites.”
Paul Marks, chairman of Mortgages Plc, said that the market does not need any further pressures.
“We are already seeing substantial increases and an additional premium will exacerbate this position, especially in London and the South East.”
