Verdict on this element of Trussonomics is delivered before the policy is formally announced! – Owl
The rumoured move comes as average UK house price leapt by 15.5% annually in July.
Suruchi Sharma Diwan www.inyourarea.co.uk
In an attempt to drive growth, Liz Truss is reportedly poised to slash stamp duty in her first mini-Budget this week. In an effort to kickstart economic growth, the government could axe plans to raise corporation tax, reverse the hike in national insurance and end a cap on bankers’ bonuses.
The economic blueprint, set to be unveiled by chancellor Kwasi Kwarteng on Friday this week, aims to stimulate further growth in the property market and help more people buy their first home. The Bank of England is expected to announce a rise in interest rates on Thursday as it battles to curb spiralling inflation.
Under the current rules, no stamp duty is paid on the first £125,000 of any property purchase, before rising to 2% between £125,001 and £250,000, 5% between £250,001 and £925,000, 10% between £925,001 and £1.5 million and 12% above £1.5 million. For first-time buyers, the threshold is higher at £300,000 – but only if the property costs less than £500,000. The stamp duty threshold was temporarily raised to £500,000 during the Covid pandemic to fire up the property market.
Whilst Downing Street declined to comment ahead of the fiscal event on Friday, industry reactions have started pouring in with critics warning that the rumoured move would make the housing crisis “even worse”.
“Doing more harm than good”
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, feels potential cuts to stamp duty may risk “doing more harm than good”. She said: “No buyer will ever complain about a tax cut, but if the Government was to cut stamp duty it would mean ignoring the fact that the real brake on the property market is a severe shortage of supply.
“Stimulating demand without addressing supply problems would risk more buyers chasing a tiny number of properties, which would push prices up. It’s what we saw during the coronavirus-inspired stamp duty holiday.”
“We need green homes, not another buying frenzy”
Gregory Dewerpe, founder and chief investment officer at A/O PropTech, Europe’s largest proptech VC fund, said: “It’s clear the government has learned little from the housing market feeding frenzy during the pandemic, where a cut in stamp duty did little other than put extreme upward pressure on prices.
“As winter approaches, the world is facing a climate crisis, energy prices are at eye-watering levels, and the UK has the oldest housing stock in Europe. We shouldn’t be making it easier to buy a house, instead, we should be making our houses greener. Government should prioritise energy efficiency rather than needlessly stimulate demand for an already tight housing supply.”
“No single magic bullet will improve the situation”
Richard Dana, founder and CEO of Tembo, the family mortgage broker, said: “I do not believe that there is one single magic bullet that will improve the situation for first-time buyers.
“We badly need innovation right across the board, from government initiatives to new offerings from specialist mortgage lenders. I fear that without this holistic approach, cutting stamp duty carries a risk that it will further drive-up house prices and put home ownership beyond the means of more people.”
“Affordability crisis of runaway house prices”
Andy Sommerville, director at property data and insight firm Search Acumen said: “We saw what the stamp duty holiday did to the market during the pandemic, and I have no doubt such a move will stimulate demand again. But, without supply-side reforms to boost housing stock, stimulating demand will mean more buyers bidding for the same number of properties, which can only mean one thing for house prices – affordability crisis of runaway house prices.
“Interest rates historically have averaged more than 4% and we’re expecting another rate rise from the Bank of England tomorrow, so buyers do need to be aware that savings they make today through SDLT may be cancelled out through elevated mortgage repayments in years to come due to elevated house prices and borrowing rate rises.”
“Two-thirds of stamp duty comes from London and the South East”
Richard Donnell, executive director at Zoopla said: “While we welcome any changes to reform stamp duty, a major move is needed from the Government to offset the impact of mortgage rates which will more than double this year and will impact market activity in London and the South East.
“Two-thirds of stamp duty comes from London and the South East where house prices are higher and the £500k+ stamp duty rates significantly add to the cost of moving. Changing stamp duty to boost market activity means stamp duty cuts will need to be targeted at homes priced at £500,000 and above – which currently account for 76% of stamp duty receipts.”
There are some, however, who are in support of the rumoured announcement saying, SDLT was an unnecessary tax anyway. The experts who support feel that stamp duty is a pretty bad tax – especially at high levels – that impedes mobility.
“Liz Truss must ensure they are targeted in the right way”
Jonathan Rolande, Spokesman National Association of Property Buyers said: “First-time buyers are always in need of a helping hand. Currently, they pay nothing up to a purchase price of £300,000. With huge inflation in the property market, this threshold is now looking on the low side.
“Increasing it to £350,000 would allow buyers to purchase at today’s prices without the burden of tax. A small adjustment such as this will not lead to a stampede and the consequent price rises seen thanks to previous cuts.”