One in Five Home Buyers Now Over the Higher Stamp Duty Threshold

7th March 2007

Halifax has examined house prices and home sales in 2,132 postcode districts across England and Wales over the past five years with reference to the stamp duty thresholds. Halifax believes the current thresholds at which stamp duty is levied should be adjusted to reflect the significant rate of house price inflation seen over the past decade.

Halifax calculates that over the past five years there has been a 281% rise in the number of home sales in England and Wales above the £250,000 threshold at which a 3% rate of stamp duty is levied. The number of residential property sales attracting at least 3% stamp duty has increased from 73,403 in 2001 to 279,408 in 2006.

Home buyers in these transactions were faced with a stamp duty bill of at least £7,500. In 2006, 19% of home buyers paid at least 3% stamp duty compared with 6% in 2001.

89% of the rise in stamp duty revenue over past five years driven by sales above £250,000

Total stamp duty revenue from residential property sales was £4.6bn in 2005/06, up 114% from the £2.1bn raised in 2000/01. 89% of the rise in the residential stamp duty take over the five years was due to an increase in the amount raised at the higher stamp duty bands (3% on sales between £250,000 and £500,000 and 4% above £500,000). Stamp duty revenue raised from sales of properties valued at more than £250,000 rose by 175% from £1.2bn in 2000/01 to £3.4bn in 2005/06. The higher stamp duty bands accounted for 74% of total residential stamp duty revenue in 2005/06 compared with 58% in 2000/01.

3.5 million properties valued above 3% stamp duty threshold

Halifax estimates that 3.5 million (19%) English and Welsh properties are now valued above the £250,000 stamp duty threshold; and 600,000 (3%) are valued above the £500,000 threshold. London and the South East account for 64% of homes valued above £250,000 and 77% of homes valued above the £500,000 threshold.

Four-fold rise in number of postcodes above the 3% stamp duty threshold

There has been a more than four-fold increase in the number of postcodes where the average house price is above the 3% stamp duty threshold. The average house price in 485 postcode districts (23%) in England and Wales is now above the £250,000 threshold, compared to 111 districts (5%) in 2001.

Biggest rise in home sales above 3% threshold in postcodes in West Wickham and Ilford

There are 206 postcode districts in England and Wales which have seen at least a 30 percentage point increase in the proportion of home sales above the 3% stamp threshold over the past five years. The largest increase has been in BR4 in West Wickham in London, up 60 percentage points from 19% of sales in 2001 to 79% in 2006. The next biggest increases were in IG4 in Ilford in London with a 59 percentage point increase and GL19 in Gloucester with a 55 percentage point rise.

Almost one in three postcode districts have more than one quarter of sales above the 3% stamp duty threshold

Sales above the 3% stamp duty threshold accounted for at least 25% of property sales in 667 (31%) postcode districts across England and Wales in 2006, compared with 181 (8%) districts in 2001. These include 71% of London postcode districts and 54% of postcode districts in the South East. All regions of England and Wales have at least 5% of postcode districts with more than 25% of home sales above the 3% stamp duty threshold.

SW7 and SW1W hardest hit by higher rates of stamp duty

SW7 in Kensington (98%) and SW1W in Sloane Square (97%) in London are the two postcode districts with the highest percentage of sales above the 3% stamp duty threshold. B94 in Solihull is the postcode district with the highest proportion of housing sales above the 3% threshold outside the south of England (78%), followed by NE20 near Newcastle upon Tyne (70%).

Average stamp duty bill at least triples in 374 postcode districts over past five years

The stamp duty payable on the average house sale has at least tripled in 18% (374) of postcode districts over the past five years, reflecting a shift in the average stamp duty rate from 1% to 3% in these districts. YO62 in York has seen the biggest increase with the average bill up 601% from £1,087 in 2001 to £7,620 in 2006. WN8 (585%) near Pemberton in the North West and TR26 (583%) in St Ives in the South West have seen the next biggest rises.

Key Facts

3% stamp duty threshold

Homebuyers face a stamp duty bill of at least £7,500 if their purchase is above the 3% stamp duty threshold of £250,000.
The average house price in London (£287,176) is above the 3% stamp duty threshold. The average London home purchase will generate a stamp duty bill of £8,615, compared to an average bill of £1,795 five years ago, a rise of 380%.
There are postcode districts with average house prices above the 3% stamp duty threshold in all regions of England and Wales. 59% of postcode districts in London (136) have an average house price above the stamp duty threshold of £250,000, while 45% of postcode districts in the South East (224) are priced above the stamp duty threshold.
56 postcode districts outside the south of England have an average house price in excess of the 3% stamp duty threshold, compared with one (B94 in Solihull at £268,376) in 2001. Average prices in 2006 were highest in B94 in Solihull (£370,484) in the West Midlands and NE20 (£370,403) near Newcastle on Tyne.
41% of residential properties sales in London were above the £250,000 threshold in 2006, along with 27% of sales in the South East and 20% of sales in the South West. In all regions of England and Wales at least 5% of sales occurred above the 3% stamp duty threshold.
There are 235 postcode districts (11%) with 50% of sales above the 3% stamp duty threshold, up from 35 (2%) five years ago. These districts span all regions of England and Wales.

4% stamp duty threshold

Homebuyers face a stamp duty bill of at least £20,000 if their purchase is above the 4% stamp duty threshold of £500,000.
46,690 (3%) home sales were above the £500,000 threshold in 2006. This was up 296% from 11,796 transactions (1%) of transactions in 2001. 77% of these sales were in London (42%) and the South East (35%).
37 postcode districts (2%) have an average house price above the £500,000 threshold, up from 8 (0.4%) in 2001. All these districts are located in the South of England – London (23), South East (13) and South West (1).
The postcode districts with the highest average house prices above the 4% stamp duty threshold are SW1X (£1,281,305), W8 (£1,111,010) and SW7 (£1,085,160), all in London.
Ten postcode districts have seen at least a 25 percentage point rise in the proportion of home sales above the £500,000 threshold. The largest increase has been in GU25 in Virginia Water (33 percentage points) in the South East, up from 27% to 60%.
There are 8 postcode districts with 50% of sales above the 4% stamp duty threshold, led by SW1X (81%) and W1K (72%) in London. Outside the South of England, the highest proportion is in Solihull (16%) in the West Midlands.
There are 54 postcode districts (3%) with 25% of sales above the 4% stamp duty threshold, compared with 12 districts (0.6%) in 2001. These are all located in the South of England - London (31), South East (21) and South West (2).

1% stamp duty threshold

Homebuyers face a stamp duty bill of 1% for property sales between £125,000 and £250,000.
327 postcode districts (15%) have an average house price below the 1% stamp threshold, up from 307 (14%) in 2001. The majority of these districts (323) are located in the north of England – North West (90), Yorkshire and the Humber (73) and North (61).
There are 496 postcode districts with 50% of sales below the 1% stamp duty threshold, compared with 510 postcode districts five years ago. The postcode districts with the highest proportion of sales below the 1% stamp duty threshold are M38 in Manchester (99%), HU3 in Hull (99%) and CF41 in Bridgend in Wales (98%). (See Table 4)
56% of residential property sales in the North occurred below the £125,000 threshold in 2006, along with 51% of sales in the North West and 50% of sales in Yorkshire and the Humber. Only 4% of home sales in London and 13% of sales in the South East occurred beneath the 1% threshold.