The hefty cost of stamp duty is deterring homeowners from moving house across the UK, with new analysis from Zoopla revealing that substantial bills are creating a 'meaningful friction' that's causing transactions to be abandoned. According to Richard Donnell, Executive Director at Zoopla, for many people, stamp duty is a near-certain expense when moving, becoming a significant disincentive.
Existing homeowners make up six in ten property purchases, and this friction is directly impacting market liquidity. The effect is amplified by lower levels of house price inflation in recent years across the south, making the fixed cost of stamp duty feel even more substantial. Regional disparities in stamp duty costs are stark – in London, where the median asking price for a home mover is approximately £600,000, the average stamp duty bill stands at a considerable £20,000.
In contrast, regions like Yorkshire and the North West have an average cost of around £2,200. In the South East, 95% of home movers pay an average of £11,250 in stamp duty – illustrating the disproportionate impact on higher-value markets.
Zoopla is urging the government to reconsider the current stamp duty threshold for home movers, which presently stands at £250,000. This threshold was established in 2014 and has not been adjusted in line with house price growth since then. If it had been indexed to reflect recent changes, Zoopla estimates the threshold would now be approximately £380,000.
This adjustment could potentially save buyers up to £6,500 on purchases within this price bracket – easing the financial burden and stimulating more market activity. The current tax structure adds to existing pressures within the housing market, which has seen muted sales conditions and constrained transaction volumes.
Residential landlords are also contending with mounting tax pressures, influencing their investment decisions and contributing to a subdued market. The regional imbalance in stamp duty costs raises concerns about its potential to restrict labour mobility and overall housing market fluidity – particularly in areas with elevated property prices.