Rising house prices to drive thousands over stamp duty threshold

House prices went up by over 1% in November to £174,910, according to Halifax's latest index – the tenth consecutive monthly increase in prices.

This represents an 8.4% increase on the same month last year, when average standardised prices measured £161,333.

The figures also reflect a broader trend of stronger prices, which in the three months to November were 7.7% higher than in the same three months in 2012, the report added.

The acceleration in house-price inflation was attributed to strong demand and slow growth in the supply of housing.

The bank pointed to high mortgage approval numbers, as measured by the Bank of England’s seasonally-adjusted figures, which were almost a third higher in the three months to October than in the equivalent period last year.

Martin Ellis, Halifax’s housing economist, said that government schemes had helped to drive the demand for housing.

“Low interest rates, improvements in consumer confidence and official schemes, such as Funding for Lending and Help to Buy, all appear to have boosted demand,” he said.

However, price rises at the current rate were not likely to be sustainable, he suggested.

“Continuing pressures on household finances, as earnings fail to keep pace with consumer price inflation, are expected to remain a constraint on the rate of growth of house prices.”

An improvement to housebuilding levels would help to realign the balance between supply and demand and keep prices in check over the medium and longer terms, he said.

Stamp Duty

The government has been accused of cashing in on higher house prices by failing to adjust stamp duty thresholds in line with rising house prices.

Buyers currently face a 1% charge for property transactions over the value of £125,000, which rises to 3% for properties valued over £250,000.

But the Taxpayers’ Alliance has predicted that rising prices will drive three-quarters of housing over the initial stamp duty threshold within the next five years, which will generate an extra £6 billion for the Treasury.

Average stamp duty is estimated to reach 2.88% of a property transaction by 2018/19 – almost a third higher than current levels – as rising prices drive thousands of properties into higher boundaries.

Find out more about stamp duty here. Need help crunching the figures? Use our stamp duty calculator here.

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