Stamp duty 'hitting property market'

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Gordon Brown's increases in stamp duty over the last decade are contributing to the current shortage of properties on the residential housing market, a thinktank has claimed.

The Centre for Economics and Business Research (Cebr) suggests that the lack of supply holding up British house prices despite interest rate rises and affordability constraints has in part been caused by the chancellor's stamp duty policy.

Mr Brown raised stamp duty on higher property values from two per cent in 1997 to four per cent by 2000. Since 1997 overall stamp duty revenues have risen tenfold to around £7 billion.

Although acknowledging a lack of new build is a major factor, Cebr argues that higher stamp duty has deterred sellers from putting their properties on the market.

It points out that the percentage of housing stock on the market falling from nine per cent during the 1980s boom to seven per cent today.

Cebr chief executive Douglas McWilliams concludes that this had the effect of introducing unnecessary volatility to the market "by restricting supply in the upturn and by reducing demand in the downturn".

"With housing accounting for 55 per cent of private individuals' net worth, introducing an additional element of volatility into the housing market through this tax is dangerous.

"If and when the housing psychology becomes negative, it suggests that the consequences will be unnecessarily severe," he said.

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