Analysis: Stamp duty
Analysis: Stamp duty
Tuesday, 02, Sep 2008 05:57
Today's announcement on stamp duty follows months of frenzied speculation about government plans, to the point where some commentators had begun to suggest a certain measure of irresponsibility in the drip-feed of leaks and suggestions filling the news pages during the summer recess.
Now it has finally arrived, opinion is divided.
On the one hand, many first-time buyers might still hold back from a purchase until the market hits what looks like rock-bottom.
"Although it is a welcome move in that it alleviates some of the problems with house purchase, one unintended consequence might be that first-time buyers still hold off and then come back to the market just before the deadline next year," Sue Anderson of the Council for Mortgage Lenders (CML) says.
It still looks like most homebuyers will still end up paying the tax though, she adds.
"Nine out of ten of total transactions will be unaffected by the band movement," confirms Royal Institution of Chartered Surveyers (RICS) spokesperson James Scott-Lee. "The move will have little impact in London where the average price a first time buyer pays is around £260,000.
"At best the relief will save buyers £1750, a drop in the ocean of the £27,738 RICS estimates as the average upfront costs of buying a home."
Ray Boulger of mortgage advisers John Charcol, takes an even firmer line. "The housing market has spluttered through the last few months with indecision on whether there would be a redefining of stamp duty clearly costing the wider economy," he says.
"A suspension for one year on stamp duty for properties up to £175,000 is absolutely not the answer to the problem. One has to question whether the government has truly thought this through."
Some experts take a more optimistic attitude. David Hoolingworth, of mortgage brokers L&C, calls the announcement "not inconsequential".
"It is easy to criticise this move but it is better than doing nothing," he says. "For those people looking to buy property it will be a not inconsequential incentive. But if you ask me if it will revive the housing market overnight, I doubt it."
But he does concede one point. "To provide a one per cent incentive is perhaps not enough to tempt that many first-time buyers back to the market," he admits.
What you're left with is a lukewarm response, even as opinions remain divided. Those who believe the change in threshold won't make too much difference usually still welcome the fact something is being done. Those who believe it will help don't believe it will make that big a difference.
Most concerns centre on duration. Will the change really just last a year? If so, it would make little difference to potential householders, who can safely sit back for at least six months and see how things pan out, meaning there's no likely kick-start to the housing market.
But it seems thoroughly unlikely to stay this way for just a year. Twelve months from now we'll be staring a general election right in the face, and no ruling party introduces taxes just before going to polls, especially polls it's likely to lose.
Analysts will also pay careful attention to the behaviour of those considering properties just on the cusp of the tax. If a couple were looking at a £180,000 property last week, what will they do now the one per cent stamp duty remains? That £1,800 may be enough to put them off. But this is no different to those toying with the idea of buying a £130,000 property last week. Often, sellers load some left-over furniture as a separate contract and bring the base price down.
Some things are certain. Firstly, there will be no more confusion over stamp duty. Secondly, the government's final decision has not shaken the earth and is not expected to make a huge change in the market. Thirdly, Labour's autumn fightback has started. The summer holiday is officially over, and the prime minister's last ditch attempt to save his career has begun.
Ian Dunt