Homebuying Costs Go Through The Roof

House prices and mortgage debt have rocketed since 1996. Alas, these other home-buying expenses have gone up even faster.

The past decade has been a great time to own property here in the UK -- and in many other developed countries, too.

I won't bore you too much detail, but see A Decade Of Financial Fashions for more information. In short, the average home now costs more than 2.6 times what it did ten years ago, plus total mortgage debt is also 2.6 times what it was when Labour came to power.

So, house prices and mortgage debt have rocketed over the past decade, which is hardly news to anyone. However, the other costs associated with moving home have risen at an even greater rate. This means that today's homebuyers are forced to dig even deeper to reach for the next rung of the property ladder.

Indeed, according to research conducted earlier this year by popular property portal propertyfinder.com, the associated costs of moving home have more than tripled over the past decade. Take a look at the table below:

As you can see, the outright winner in the housing boom (apart from owners themselves) has been HM Treasury, which has seen the typical amount of stamp duty land tax (SDLT) rise more than eightfold. Although SDLT is a fixed percentage of the purchase price, the rates of tax are banded. Hence, higher-value properties pay a higher rate of tax, as the table below shows:

* This table was amended in March 2009 to show current Stamp Duty rates.

In most parts of the UK, few homes fall into the nil-rate band of SDLT, and a decent family home in the South East or London can easily be liable to 3% or even 4% SDLT. Thus, Chancellor Gordon Brown has done very nicely from the property boom, thank you very much!

The runner-up spot is taken by estate agents, whose fees (usually upwards of 1.5% of the purchase price plus VAT) are also based on underlying house prices. Hence, their income is now 2.4 times what it was in 1996, so it has increased roughly in line with house prices.

However, we might show pity for the poor solicitors, conveyancers and removal men whose fee increases have only moderately outpaced general price inflation (around 1.5% a year over the past decade.) For the record, both legal costs and removal fees have risen by 2.6% a year since 1996, which is nothing to get excited about.

So, when you start planning your next property purchase, don't forget to factor in these additional costs of moving, as they can add a twentieth (5%) to the overall cost. This applies doubly to first-time buyers, many of whom fail to budget for these additional expenses, which could exceed £1,000 a year for a ten-year stay in one property. Ouch!

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