The Stamp Duty Lottery

First time buyers have just an eight per cent chance of buying a property under £60,000 today compared to just over one in two 10 years ago

First time buyers have as little as an eight per cent chance of finding a property which does not attract stamp duty reveals research from Alliance & Leicester Mortgages.

Last year just 99,234 properties in the whole of England and Wales sold for less than the £60,000 stamp duty threshold which leaves buyers exempt - a one in 13 (8%) chance of escaping the duty. In 1995, homebuyers had a 60-40 chance of avoiding the tax with 484,804 properties being sold for less than the £60,000 threshold.

The picture looks even bleaker when you consider that only six per cent of typical first time buyer properties ie flats/maisonettes, sold for under £60,000 last year. This compares to nearly three quarters (72%) of flats/maisonettes being sold under the stamp duty threshold ten years ago.

And the number of houses available under £60,000 has decreased dramatically across all regions. This nationwide phenomenon has hit London the worst.

There has been a 99.7% drop in the number of houses available under £60,000 in the capital, with only 144 properties sold under £60,000 last year compared to 41,242 in 1995.

Stephen Leonard, Director of Mortgages, Savings & Investment Products at Alliance & Leicester, said: “Our research has found that the number of houses that are available to first time buyers under the £60,000 threshold today is severely limited. Stamp duty was never intended to be a prohibitive tax and with first time buyer activity at a 20 year low, this group of people could do with a helping hand. That is why we are calling on the Chancellor to scrap the tax for first time buyers completely.

“The Chancellor has a great opportunity to alleviate the strain on first time buyers by exempting them from stamp duty in this year's Budget – a move that would be welcomed by those struggling to achieve that first step on the property ladder.”

Other key findings reveal:

Unsurprisingly, London sold the least amount of properties under £60,000 in 1995 (37%) compared with just 0.1% of houses sold in 2004, further highlighting the plight of the first time buyer looking to buy a property below the nil-rate stamp duty threshold in the capital. However, this is the biggest drop of all the regions at 99.7%.

The South East has seen the next biggest drop at 97.4%, with 47% of homes costing less than £60,000 in 1995 compared with only 1.2% in 2004

In 1995 there were 805,210 houses sold and by 2004, the number of transactions had increased by 54% to 1,240,870.

If the threshold was raised to £150,000 the findings indicate that over half (51%) of today’s homebuyers would still be affected by stamp duty. This is compared with 40 per cent having to pay stamp duty ten years ago in 1995.

Estate agents around the regions are not impressed by the type of properties available to first time buyers. They had the following to say:

“There’s been some well advertised beach huts that have fetched between £30,000 to £40,000 in the Branscombe area. Round here £75,000 might get you the smallest, grottiest bedsit in the area.”

“£60,000 might, if you were really lucky, get you a very small, very run down studio.” BN3, Hove

“You might be able to get a shed or garage, but that is about it.”

CR3, Woldingham

“£60,000 could get you a terrace in a not very good area in the north of the City. £75,000 could get you a townhouse but it would probably be in need of great repair.”

L3, Liverpool

If the stamp duty threshold remains unchanged, Alliance & Leicester Mortgages forecast that nine out of ten (90%) first time buyers will have to pay the tax by 2008 based on current trends, with this hitting 95% by 2011, making the first step onto the property ladder more and more difficult.

In fact, one in four (25%) first time buyers who bought a property in the last 12 months, found that the cost of stamp duty was a major obstacle to getting onto the property ladder according to recent research by Alliance & Leicester Mortgages.

With the average price of a first time buyer property now reaching £145,408(), the percentage of first time buyers affected by stamp duty has trebled in the last seven years. Whereas in 1997 just over 27% of first time buyers paid stamp duty, 76% of first time buyers pay stamp duty now have to find the cost of this tax(<=).