Thanks to yesterday’s announcement to remove stamp duty for first-time buyers purchasing properties under £250,000 in some parts of the UK virtually all the housing stock will now be free of stamp duty for first time buyers. But unlike the previous stamp duty holiday (for properties under £175,000), this new measure will help in London as well – something missing before.
In today’s tight lending environment much higher deposits are required, making extra draws on capital a burden. Moreover, first time buyers are more likely to be near their credit limit. This means they are less able to extend their borrowing to cover the additional cost of stamp duty. Removing this should be a welcome boost to many, just at a time when their finances are stretched.
An important knock-on effect of this measure will benefit the house-building market that has been particularly hard hit by the housing downturn.
Note on Tory ‘spin’ here. Much as the Tories claim that Labour has ‘stolen their clothes’ on the stamp duty break, they first mooted the policy only after Labour introduced the stamp duty holiday in September 2008 for properties under £175,000. Since then, the policy has been lost in the policy muddle of CCHQ, increasingly watered down to the status of “aspiration” rather than as a firm commitment.
Nice try, Tories. In fact a far closer relative to yesterday’s announcement is the successful policy undertaken by Barack Obama’s administration which introduced an $8,000 First Time Home Buyer Tax Credit to keep the lower end of the property market, and tens of thousands of jobs in homebuilding and the wider and the construction industry, supported.
Introduced in 2009, the US federal government aimed to create a stimulus for the housing market and real estate business and provide the needed spark of the economy to recover from recession. The measure proved to be so popular – and successful – it was extended in November.
By removing stamp duty for the lower end of the market Darling is mimicking Obama’s measure, which – like yesterday’s announcement – had the backing of the property and construction industries.
Just as the measure helps first time buyers across the country, it does something to correct the insane high-end London property market.
At the ‘super-prime’ end of the market (approximately four times the average property price – £1.7 million) London housing prices have been very buoyant over the last year – in some areas of London the average price of a high-end property grew by over 16 per cent last year.
Adding a new stamp duty rate of five per cent on houses worth a million pounds or more is a fair way of lifting the burden from those just starting off.
After Vince Cable’s ‘million-pound mansion’ tax was defeated after successful lobbying from Lib Dem PPCs in Hampstead and Richmond, we should hope that they would support this move.
We wait in hope – while we do so let’s look at the Tories:
Following the chancellor’s ‘one-off’ on bankers’ bonuses, a measure like higher stamp duty on houses over £1 million is a longer term measure to bring some sense to the hyperactive London property market, fuelled by end-of-year City pay perks.
Notwithstanding this boost for first time buyers, they need to come clean on their housing policy as a whole.
After Cameron’s Conservative councils’ worrying rewarming of 1980s policy of selling off council homes, lack of plans for housing modernisation and reducing the 50 per cent affordable housing targets, just weeks before the election Tory PPCs must be wondering where on earth their housing policy has gone.