‘Stamp duty change will have repercussions for years to come’
History tells us that the stamp duty holiday could have a negative impact on the market, argued London tax barrister Patrick Cannon.
He compared the change to the stamp duty holiday introduced in 1992 from Norman Lamont, Chancellor of the Exchequer under Prime Minister John Major.
The change could result in vendors raising their asking prices, falling house prices when the cut ends, and people falling into negative equity.
Cannon said: “If anyone remembers Norman Lamont’s ‘stamp duty holiday’ for eight months in 1992, they’ll recall that he raised the stamp duty threshold from £30k to £250k to get the house market moving in a time of recession.
“Sound familiar? It had a negative impact, because vendors raised their asking prices by roughly the same amount as the tax saving. It therefore worked out as a subsidy to sellers, at the cost of the taxpayer.
“Also, when the holiday ended, prices fell to reflect the re-imposition of the tax. Buyers who had bought at the higher prices then got burned as values fell with some put in to negative equity.”
He added: “An FOI request to HM Treasury found that Mr Lamont’s holiday eventually forced a collapse in the number of transactions, and prices fell sharply.
“The announcement of this fall in house prices further discouraged potential buyers.
“The stamp duty holiday, which had been intended to bring forward a recovery in the housing market, ended up further undermining the confidence that was essential to recovery.
“When the government reintroduced stamp duty, the holiday had cost £400m.
“Shortly afterwards, the pound tumbled out of the exchange rate mechanism on Black Wednesday.
“My concern is that a stamp duty change will not benefit first time buyers, and it could have repercussions for years to come.”