After the hope generated by the Government’s recent housing white paper that it is serious about sorting the crisis hit housing market, it may have delivered counterproductive blow by failing to address the issue of stamp duty.
There was hope in the housing industry that Chancellor Philip Hammond would take on board concerns that the current rates of stamp duty, the tax paid when you buy a home, is hampering first time buyers in particular.
There were also concerns that the increased rate at the higher end of the market is putting off investment in the prime property market in London and this is stalling prices and rents and having a knock down effect.
But Hammond ignored arguments made him by the industry in the run up to the Spring Budget and he did not mention the property market at all in his speech.
Robert Fraser, managing director of Fraser & Co, is among those who believes that the Chancellor failed to understand that the impact of stamp duty change is being felt at every level of the market, from international investors, to downsizers and first time buyers, where prices at the higher end are faltering and competition at the lower end of the market is intensified.
‘Transaction volumes have remained strong and steady, but it is no secret that they are not reaching the level they could be. We are living in an unpredictable period in which the London property market needs to be attractive from both a domestic and international perspective, ensuring that conditions are created for the industry to thrive,’ he said.
The failure is actually harming the Government’s tax collection abilities as it is stifling the market and therefor the amount going into the Treasury from stamp duty is less than it should be, according to Henry Smith, chief executive officer of the Aitch Group.
‘The Government has yet again chosen to ignore the effects of a stamp duty levy which is damaging the UK property market, as well as reducing the government’s own tax takings. Lower receipts, reduced transaction volumes and a slower rate of house building have come to define a policy that prevents the housing industry from performing its role effectively,’ he said.
We are already seeing the 3% surcharge on additional homes impacting the Build to Rent sector and investor confidence, and the effects are being disproportionately felt in the capital where prices are much higher than the UK average. Whether it’s developers, agents, architects, contractors or investors, the negative impact of stamp duty is having an impact across the industry and it is no surprise that leading figures and bodies are demanding a change,’ he explained.
Hammond is being criticised for not doing more to help first time buyers who have a critical role in keep the housing market moving. ‘Given increasing house prices, stamp duty is now paid by three quarters of first time buyers and so it raises the question who does the current stamp duty exemption actually help?’ said Lynda Clark, chief executive officer of First Time Buyer.
‘First time buyers play a fundamental role in ensuring a stable and healthy property market, not just by bringing in new life to the buying cycle but also facilitating the completion of potentially lengthy chains. Affordability is a major issue for many first time buyers today and by removing more of the upfront costs associated with home buying, we will see more buyers move into the market which everyone will benefit from,’ she added.
Glynis Frew, chief executive of Hunters Property, pointed out that it is even more of an issue for first time buyers in London where property price are so much higher and it means that they are paying tax at 5%.
Families who want to buy a family home in London, perhaps moving from one area to another to buy a larger home for a growing family or to be closer to schools or work, are being penalised and many are opting to stay put to avoid paying stamp duty, according to Jeff Doble, chief executive of London wide estate agents Dexters.
‘Current stamp duty levels are a tax on free movement in London. This has reduced transactions substantially, impacting on the level of tax collected by the Government and is therefore damaging the economy. In addition, there is an entire eco-system built around moving house, from removals companies to furniture suppliers, from interior designers to painters and decorators. All these businesses are being hit by the Government’s refusal to reform stamp duty,’ he added.
