Winners and losers from the stamp duty holiday

As the end of the stamp duty holiday looms on properties sold for between £125,000 and £175,000, the CML has looked at which regions have benefitted most and least from the temporary concession. London and the South East are the relative losers, and the total cost of the concession will be much less than the Treasury originally estimated.

In September last year, when the government temporarily raised the nil rate threshold for stamp duty to £175,000, the CML estimated that this would mean the proportion of homebuyers who would not have to pay would rise from a quarter to a half. In fact, at its peak in the first quarter of this year, the concession benefitted even more than this, with 57% of all those buying with a mortgage not having to pay. However, modest house price increases and a shift in the mix of houses bought (towards higher value properties) brought this down to 51% in the third quarter of the year.

The flat nature of the concession - the same in all regions of the country - means that there is a wide geographic variation in the effect. Those areas with generally lower house prices see the greatest benefit. Last year, just before the threshold was raised, the Northern and Yorkshire & Humberside regions both had the greatest proportion of exempt transactions (purchases under £125,000), but in each of these regions this was still under half. A year later, with the higher threshold in place, over three quarters of transactions in the North are exempt from stamp duty.

But at the other end of the scale, London predictably sees much less benefit. Before the measure was introduced, only 2% of transactions were exempt. A year later, with the higher rate threshold in place, still only 17% of London borrowers escape paying. London accounts for 13% of house purchase transactions, but only 6% of borrowers helped by the stamp duty concession.

When it introduced the concession, the Treasury estimated that the cost in foregone revenue would be £615 million. At that point the concession was due to last for one year (it was subsequently extended until December 2009). In fact, CML estimates suggest a total final cost to the government of £356 million in the first 12 months - a little over half the government's initial estimate, as a result of the low volume of property transactions over the period. Forecasting through to the end of the year when the concession ends, the CML estimates that total foregone revenue will be a little under £500 million.

CML Senior Statistician James Tatch, who undertook the analysis, commented: "We may see some surge in activity at the end of the year as borrowers rush to beat the deadline on the stamp duty concession before it ends. This may bring the total benefit to consumers (and cost to the Treasury) nearer the government's original estimate, but there is no realistic chance of the government "spending its budget" on this by the end of the year."

The CML continues to believe that fundamental reform of stamp duty is necessary. It is a tax that discourages labour mobility, and its "slab" structure has the effect of causing transactions to "bunch" just under each of the tax thresholds. While abolition would be the best option, a move to a graduated structure would be an improvement on the current system, even if done on a cost- neutral basis. While the temporary concession was welcome as far as it went, it is disappointing that the government has not sought to implement this desirable reform of an anachronistic tax.