The rumour mill has been working overtime this weekend, with Treasury officials no doubt briefing the press about what might possibly be coming over the horizon in terms of stimulating the housing market.
Lo and behold, the tool that looks likely to be used is stamp duty. Who would have guessed that? With the Chancellor, Rishi Sunak expected to announce tomorrow that all purchases will be exempt from the tax on properties valued up to £500,000.
There’s no doubt that this is a big move – currently only first-time buyers have any sort of meaningful exemption, with £300,000 being the threshold above which stamp duty kicks in for them. Although there is no stamp duty payable on properties below £125,000.
For those looking to purchase there will be a significant saving to be made, and this perhaps goes double for those existing homeowners who have previously not benefited from any sort of holiday. Currently if you buy a home at £500,000, you’re going to end up paying £15,000 to the tax-man – again, who wouldn’t want this money in their own pocket rather than handing it over to the Treasury?
However, there are some gaps to be filled in terms of a number of details when it comes to such a move, not least the length of time such a holiday will be granted for. There is some speculation that Sunak will opt for between six months to a year which would make this ‘interesting’ for a number of reasons, not least the spike in purchases it will undoubtedly cause, the pressure on property market practitioners during such a period, and the likelihood of a cliff-face drop-off in activity when it ends.
The second ‘gap’ in these proposals, is of course related to the first, in that such a holiday comes with a finite life. It is a short-term attempt at a boost – that, in has to be said, is likely to be successful – but it doesn’t really address the long-term sustainability issues that are inherent within the purchaser market, and some might argue it will exacerbate the ‘boom and bust’ nature of activity which I thought we were trying to cut down on.
Thirdly, again there is more confusion about when such a measure will be brought in. If Sunak is to go ahead with this – and it’s not just enough to be told he’s ‘thinking’ about it – then it needs to be implemented immediately, not at some point in the Autumn, perhaps when he issues his next Budget.
To do anything else will effectively put the housing market on hold for the next two to three months, because why would you as a purchaser go ahead now, when you could wait a relatively small amount of time and potentially save thousands of pounds?
For a housing market that has only just been brought back to life, it is totally unacceptable for it to be put back into stasis for a few months at the Government’s behest. It would also seem to a rather daft way to go about trying to boost the market.
More will be known when Sunak makes his announcement on Wednesday this week, but there should undoubtedly be a careful consideration of its short-term nature and the timing of the introduction. Getting this wrong could do significantly more damage than good over the next few months, when the whole point was to create an environment which delivered the opposite. Stamp duty is a blunt tool, but it could deliver a sharp sting for all stakeholders if they get it wrong.