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UK property industry hoping for good news in Wednesday budget

The British Property Federation and the House Builders Federation have both called for a reduction in stamp duty on bulk residential property purchases to help large investors. Bulk purchases houses and flats have been subject to 4% stamp duty even if the duty on the sale of individual units has only been charged at 0%, 1% or 3%.

The higher duty has been cited as a hindrance to large institutional investors attempting to enter the sector.

Estate agents have also been calling for changes to the stamp duty regime. According to David Smith, senior partner in estate agency Dreweatt Neate, stamp duty costs are strangling the market and the current system of thresholds is unfair.

'Why should someone paying £500,000 for a house pay Stamp Duty at the same rate as someone ready to fork out £2 million for a property who, by the very nature of the transaction scale, obviously has more budget to play with?' he said.

Some want stamp duty scrapped completely. 'It is not only home sellers who are losing out. The Government is shooting itself in the foot by losing revenue from abortive transactions that would otherwise take place, and also losing out when sales are negotiated into a lower tax bracket. The most pernicious aspect is the banding which causes such a massive hike in the amount buyers have to pay if they step over the threshold of each level,' said Nick Salmon, commercial director at Harrison Murray.

'With the housing market now yielding so little to the Treasury, this is a golden opportunity to soften the cudgel of this iniquitous tax without affecting the Government's overall tax take significantly,' said Nick Leeming, director at Propertyfinder.

Other issues include cutting VAT to 5% for all repair and maintenance work to help bring empty homes back into use.

The budget is expected to finally reveal plans for the Government's long awaited house building stimulus. Alistair Darling is expected to announce a consultative initiative whereby the Government will seek expressions of interest from financial institutions interested in supporting the building of thousands of new homes to rent and so revive the moribund house building industry.

Proposals are expected to be invited from pension funds and insurance companies, with the main concession likely to be a guaranteed 8% gross yield, for a fixed period, for delivering and managing high-quality homes for people to rent.