Page last updated at 16:04 GMT, Saturday, 9 August 2008 17:04 UK

Stamp duty rumour 'hitting sales'

Estate agent window
A freeze in stamp duty could encourage buyers of an average-priced home

Uncertainty about stamp duty changes is causing further problems in the fragile UK housing market, the BBC has learned.

A poll for the National Association of Estate Agents found that 24% of more than 1,000 of its members felt that sales had fallen through as a result.

But Housing Minister Caroline Flint said lack of affordable credit was a bigger issue keeping house sales low.

Last week, Chancellor Alistair Darling said a cut in stamp duty was one option on the table to help house buyers.

Currently, people buying properties for between £125,000 and £250,000 pay 1% in stamp duty at the time of sale.

A responsible government can't just have a knee jerk reaction to the latest headline an organisation wants to get in terms of this challenge we are facing
Housing Minister Caroline Flint

Those spending more than £250,000 pay 3%, while homes worth more than £500,000 incur a 4% rate.

It rakes in about £6.5bn a year for the Treasury.

"Postponing or freezing the tax on homes worth over a million pounds probably wouldn't deter many buyers but for owners of an average-priced home, it could make a major difference to the overall cost," said BBC business reporter Joe Lynam.

More uncertainty?

The UK housing market has practically stalled as mortgage lenders have increased their repayment rates and are demanding higher deposits to access deals.

STAMP DUTY RATES
£0-£125,000: Nil
£125,001-£250,000: 1%
£250,001-£500,000: 3%
Over £500,000: 4%
Rates are different for properties in disadvantaged areas
Source: HMRC

Last Tuesday, the Sun newspaper whipped up a frenzy of speculation after reporting that the government planned to offer a holiday from stamp duty payments to revive the flagging sector.

The chancellor refused to rule out changing the tax, but insisted a "number of measures" were being considered and said that the government had come to no conclusions.

But according to the NAEA survey, his comments have engendered more uncertainty, with 91% of 1,017 respondents suggesting that consumers have since become more concerned about the market.

And 24% - 241 estate agents - of 1,007 NAEA members said that the spectre of a possible "tax holiday" was hitting sales as buyers put off completing in a bid to avoid the charge.

'Over-hyped'

But Housing Minister Caroline Flint dismissed the claims as "over-hyped" and blamed estate agents and "certain parts the media" for driving speculation.

In an interview with the BBC, she said that at the present time there are a lot of factors people are thinking about when considering buying or selling a property.

The key being the scrapping of mortgages, such as 100% mortgages, which allowed people easier access to get on the property ladder.

"We know that the upfront costs in other areas dwarf what stamp duty asks for and in many cases we know that many first time buyers around the country pay no stamp duty at all," she said.

The housing minister reiterated Mr Darling's comments made last week that a range of options are being considered to boost the housing market and that a decision would be announced in the Chancellor's Pre-Budget report in the autumn.

Ms Flint said: "A responsible government can't just have a knee jerk reaction to the latest headline an organisation wants to get in terms of this challenge we are facing."


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