Getting on London’s property ladder today is, for most people, an absolute nightmare. On paper, mortgages are readily available, even up to 100% of a property’s value, but actually getting a bank to lend requires most people to have attained a level of monetary perfection way beyond those of the financial institutions they’re trying to borrow from.
On top of that, the UK’s stamp duty structure has moved from the previously simple-yet-unfair system that attacked people buying just over the £250k threshold (where purchases up to £250,000 were taxed at 1%, with those at and above £250,001 taxed at 3% on the entire amount) to an extraordinarily complicated system that has people reaching for Google and online calculators, and then for the whiskey when they see what it’s going to cost.
Effectively we’re in a place where first-time buyers are priced out of the bottom of the market; where second time buyers are shut out of the middle by failing to meet banks’ criteria to borrow again; and where buyers towards the top are put off moving altogether (or prevented from doing so) by the prospect of a stamp duty bill in the hundreds of thousands of pounds.
Many people in London have become property millionaires through the rise in house prices, but this doesn’t necessarily mean they’ve got untold riches. Nor does it make buying their next home necessarily easier. Unless someone is going to cash in and leave London, their princely equity will disappear straight into the next purchase before we even talk about moving costs.
Take a typical 4-bedroom family house in Islington, now selling for an eye-watering £2.5million. Anyone wanting to buy one of those can look forward to a stamp duty bill exceeding £200,000. That rises to an astronomical £288,000 if that buyer also happened to own a second property (hardly out of the question in a couple where each may have bought their own home before getting together).
We’re now quite regularly meeting people who, rather than give a few hundred grand to the taxman, are simply staying put and modifying their existing home, often for less than the stamp duty on the next one. Not a bad move for them, but it does upset the natural run of things, takes more property out of the market, puts more pressure on supply and further increases prices and costs.
There is a point where enough is enough. London’s young people are dismayed at the prospect of purchasing a property; thirty-somethings are only just thinking about moving out of their childhood bedroom; and people elsewhere are losing interest in buying because of exorbitant taxes. Hardly the proud nation of homeowners we’re all told we’re supposed to be.
Prosperity shouldn’t be primarily based on property, and it’s a good thing for people to stop obsessing about the price of their home and instead to concentrate on enjoying it, but we can’t help thinking the only option we’re ever given with stamp duty legislation is one that makes life difficult.
How long before someone in power wakes up?