Stamping on house prices: Sue Fieldman finds the imminent return of 1% duty is distorting the property market

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The Independent Online
HOME-SELLERS are being held to ransom by purchasers, who are using the imminent reimposition of stamp duty as a negotiating ploy to reduce house prices further.

Stamp duty was lifted last December on house sales up to pounds 250,000. The Government insisted that it was a temporary measure, and that the tax would be re-introduced on 19 August.

This week the Opposition failed to win an extension until next March. Unless homebuyers complete by 19 August, they will have to pay stamp duty of 1 per cent of the purchase price on all properties above pounds 30,000.

For a purchaser of a house worth pounds 200,000, this means having to pay pounds 2,000 stamp duty. Many buyers will have not budgeted for this extra cost, particularly if they started looking for a property several months ago.

Mark and Julie Eve, or example, could find it makes a difference of pounds 660. They live with their baby Jade in East London, where they are selling a flat for about pounds 50,000, and buying a three- bedroomed house for about pounds 66,000. If they do not make the deadline they will have to find the extra pounds 660 for stamp duty.

Mr Eve said: 'We started looking about two months ago, when we found a buyer for our property. We have not budgeted to pay stamp duty even though we knew it was coming back. Our buyer is a first-time buyer, and she also wants to save the stamp duty'.

The Eves are buying now because they reckon that house prices are low, and the saving of stamp duty means that they can put the extra money towards decorating their new home.

'It is like someone giving you pounds 660,' Mr Eve added. 'We are hoping that we make it in time for the deadline. The searches have been done and our solicitor reckons that we should be able to do it.

'I think they should abolish stamp duty altogether. It would encourage more first-time buyers to go ahead.'

But they have not, with the result that, in an already depressed market, buyers are using the 19 August deadline as yet another factor to talk down the price of a house, together with the well- worn cliches of a 'poor surveyor's report' and 'flaking ' paintwork.

Jill Trelfa, of the solicitors Trelfa & Co of Middlesex, said: 'People want to get in by 19 August. If they can't get it done, perhaps because the seller has problems up the chain, then they are saying that the price of the property will have to be adjusted so that the seller will have to pay their stamp duty.

'It is not exactly blackmail, but more that they have budgeted tightly and just do not have any more money'.

Jan Rafferty, a negotiator with the estate agents Strettons in East London, has also found that some purchasers are 'trying it from that angle'. She said that in the present market, sellers were over a barrel if a purchaser insisted that they would have to pay the stamp duty.

First-time buyers are particularly aware of the financial impact of stamp duty on their budgets. Selwyn Tash, a North London conveyancing solicitor, said: 'They are quite prepared to tell a vendor that if they have to pay the stamp duty on top they will go and buy the house down the road which is a pounds 1,000 cheaper.'

The deadline is putting pressure on solicitors to get their conveyancing act together and complete transactions before 19 August.

There should still be ample time to complete transactions before the deadline, but as time ticks away buyers may have to pay extra for personal searches and couriers.

They should ask their solicitors now for an estimate of any likely additional costs in order to avoid running up a huge bill of extras that would outweigh the stamp duty saving.

(Photograph omitted)

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