The £250,000 stamp duty threshold has a "devastating" effect on housing market transactions and forces thousands of people to sell their property at huge discounts.
There are 930% more transactions just beneath the 3% stamp duty threshold than above it, according to new research from the London Central Portfolio (LCP).
Some 9,721 homeowners a year are unable to sell because of the threshold, and an additional 13,866 are forced to sell at a discount of up to £10,000.
Owners may have to wait two-and-a-half years to get a fair price for their property.
The research, commissioned from Cass Business School, was released days before Chancellor George Osborne's Autumn Statement, as pressure grows for him to scrap stamp duty for cheaper properties.
It showed that 73% of homeowners sit in the precarious price band between £125,000, when stamp duty kicks in at 1%, and £250,000, when it leaps to 3%.
The 3% threshold is unchanged for nearly 15 years, despite average house prices increasing over three-fold from £79,242 to £257,728 in that time.
Stamp duty at £250,001 was increased from 0% to 2% in 1997, from 2% to 2.5% in 1999, and then to 3% in 2000.
Every time the stamp duty percentage rate is increased, the spike in sales under £250,001 becomes more and more pronounced, LCP said.
An incredible 930% more transactions take place between £240,000 and £250,000 than between £250,000 and £260,000, at which point transactions begin to resume a normal pattern.
On current growth levels, 52,654 more households will reach £250,001 over the next five years, and buyers will face a stamp duty bill of at least £7,500.
LCP chief executive Naomi Heaton said: "The Government need to grasp the mettle and reduce the tax hike at £250,001. While it will have a cost to the Exchequer, it will be a drop in the ocean compared with the stimulus packages already introduced.
"The long-term impact for these packages is unknown and probably dangerous, whilst reducing the stamp duty rate is guaranteed to make a difference for good, for second steppers and first-time buyers."
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