Last week saw the government change stamp duty once again, temporarily cutting the tax on property purchases worth up to £500,000.
While I’m sure the change will be music to many people’s ears, I’m not a big fan of this latest tinkering with stamp duty, for a few reasons.
Firstly, it looked like the market was starting to bounce back without the government getting involved – pent up demand was feeding into the market and people were making purchases again. Now people have been given a massive kick in the teeth if they bought before the change came into force.
This stamp duty holiday has come at a time when the government is badly in need of tax receipts. The national debt is already growing due to its Covid-19 interventions, and I think it made little sense to give a handout here. Personally if you’re going to give a tax cut or a handout I think there are areas more deserving than the house purchase market.
It’s also storing up problems for the future.
I would expect there to be a boom in early next year, assuming we leave the EU without any major problems, followed by transactions falling off a cliff come April 1st 2021. There could be some house price inflation in the short-term, followed by house price falls when demand drops.
In short, the government’s short-termist attitude will create a boom-bust effect, which didn’t need to be created. What would the alternative have been? We would have witnessed a slightly dampened down market but things would have continued as normal.
I have discussed in the past how I’m getting tired of the government meddling with stamp duty every year. It’s changing so often that you wonder whether they should just do away with the tax altogether and replace it with higher ongoing taxes, like council taxes.
I’d like to see more stability.
For me it sends out the wrong message when the government is never prepared to leave a market to operate as normal.
New housing should be prioritised to keep house prices in check, but instead all we get are sticking plaster measures introduced for political gain to prop up the market every other year.
Ryan Bembridge is Editor of PropertyWire
