Stamp Duty On Property Deeds For Regular People Moving Home Is Stupidity

I guess you could say that about a lot of taxes. But stamp duty payable on buying a home does real damage to the economy for no good reason. I understand the argument that a broad tax base is better than a narrow one with high rates, because a broad tax base is less arbitrary and is likely to have fewer side effects than a narrow one. But to me, taxing the purchase of a home at a rate of several percentage points seems confiscatory.

Suppose you're buying a family home, let's say a house regardless of whether it's a freehold or a leasehold, priced at €300,000. In this country (Finland), you are liable to pay 4% in stamp duty. That is, €12,000. In addition to that, you must pay Land Registry fees to the tune of a couple of hundred euros. When you're selling, most people employ an estate agent whose fee is usually something like 3-5% when selling a house. If you do everything yourself except pay the bank to do the paperwork and pay for having your house listed on the most high-traffic property search websites, you will have to pay the bank a couple of hundred and a couple of hundred more per six months for marketing. The cost of moving a a typical family home most likely range from €800-€1200.

The end result is that if you switch from one house as in the example to another similar one, it will set you back between about €14,000 and €29,000. That is insanely expensive! And that does not even include expenses like possibly having to rent because of having accepted a job outside of daily commuting range or buying new furniture because the old ones are the wrong shape or size.

Nobody does that except for really good reasons. The stamp tax nearly doubles the already massive cost of moving a family home. The near-prohibitive cost together with subsidies for home-ownership and the relatively high taxation of rental income lead to a misallocation of labour in the economy.