As if house sellers didn’t have enough to worry about the Government has put the boot into the housing market with an extraordinary announcement that it is considering a potential freeze of Stamp Duty.
In what must have been a moment of madness the Chancellor of the Exchequer let slip on the Today program that the government might set out plans in the Autumn to “help people with housing” which has been seized upon by the press and opposition politicians as confirmation that Labour intend to propose a deferral of stamp duty payments.
The problem isn’t that this was a Conservative initiative that Labour have stolen – frankly we need all the ideas we can get. Nor is it that there are some fundamental problems with ‘deferring’ the payment of stamp duty. Nor is it that such a policy is unlikely to have much impact on the first time buyers that it is suggested it is to be targeted at. No, the big problem is the way it has been announced. This is just being considered and no decision has actually been made. Can you imagine anyone thinking of buying a home now wanting to go ahead and pay a tax that might be postponed in a couple of weeks?
How much is stamp duty?
Stamp duty is a mad tax. It is not a progressive tax – the amount changes as you move from one band to another rather than being a percentage of the price you pay. Here are the bands that apply on the purchase price you pay and you will see how much money buyers might save if Mr Darling’s idea were to come to pass.
Up to £125,000 0%
£125,000 – £250,000 1%
£251,000 – £500,000 3%
£500,001 or more 4%
Nº10 has been blamed by the Treasury of leaking the idea – something that they deny. Whoever is to blame, the number of homes selling now has fallen to record lows. Values are falling as a result and the number of people who will find themselves with problems affording their mortgage is expected to creep up as summer turns to autumn.
“This is a dead parrot”.
As I explained a couple of weeks ago, the number of houses actually selling has fallen to a trickle. Whilst some in the housing industry still suggest that the market is ‘just asleep’, to misquote Monty Python, in fact this market is dead!
Agonising over the merits of postponing stamp duty is going to have little effect on a market that frankly needs cardiac massage. There is no lack of enthusiasm from vendors wanting to sell and there are many buyers who say they would like to move. The problem remains in getting a mortgage and now, thanks to Mr Darling, the few buyers who could commit are now back on the fence waiting to see if they are about to get an unexpected stamp duty windfall.