Stamp duty – a political sticking plaster

At the time of writing this article the Government finally announced their plan to boost the housing market. As anyone who has picked up a paper, flicked on the TV or glanced at the internet will know, Mr Darling is planning a year long tax “holiday” worth up to £1,750 but only for buyers of homes between £125,000 to £175,000.

With the Government currently on the ropes and opinion polls hitting an all time low, I wonder what sort of reactions the ‘bods’ and political spin doctors at Number ten were expecting from this announcement? Dancing in the streets? A couple of by-election victories perhaps? Certainly the very least they could have hoped for were a couple of positive headlines. But alas, as least as far as the press are concerned, good old Gordon has just set himself up for another kicking.

The general feeling has been that after all the waiting and wondering, we are left with a plan, which is nothing more than a ‘drop in the ocean’, or as some of my esteemed colleagues have called it a ‘political sticking plaster’. The crux of the criticism is that few people will benefit – especially in the south east and London where only 3,000 homes will get a stamp duty break. Housing charity Shelter said that 15,000 families could benefit form the overall package – worth £1.5 billion – but 45,000 face repossession this year.

Another point to make is that historically speaking ‘holiday’ period initiatives haven’t proved to be hugely successful when it comes to boosting the housing market. Many of us in the business will remember the conservatives announcing a future date for terminating joint tax relief, which resulted in an unprecedented flood of unsuspecting first time buyers into the market believing they were doing the right thing by buying a home to save money before the deadline. As we now know the market dried up after August 1988, which was just after the termination date, many estate agents believe that this was one of the factors which plunged the housing market into a slump in the early 1990s.

As far as stamp duty goes it is worth remembering that they did it before and that didn’t work either! Again we can recall on past mistakes when Norman Lamont, the conservative chancellor introduced a stamp duty holiday in the housing market down turn in 1991, at that time the number of transactions continued to reduce and at the time the Nationwide Building Society reported a continued fall in house prices. The Stamp Duty Holiday continued till the summer of the following year and only resulted in the government losing hundreds of millions of pounds.

But are there any positives at all to be taken from this initiative? Well as feeble as it may sound I suppose we should take some relief at the fact that the Government have finally made a decision. Many of us have been extremely frustrated by the government’s complete indecision over the last few months. At a time when we have been continually bombarded with stories referring to the doom and gloom of the property market, when we have turned to our formidable Government for a little hand holding, only to be aghast at their indecisiveness and incompetence.

Some say that this indecision has contributed to the problems faced by the market. For instance, the National Association of Estate Agents has recently reported that 98 percent of its members, of which I am one, believe consumer confidence has been further damaged by the government’s perceived indecision with a further 56 percent of agents confirming losing sales.

Quite simply a stamp duty holiday is just another symptom to the cause. What the government needs to do is reform its stamp duty policy altogether, to make it more affordable in all price ranges, in addition to reducing interest rates. With all the doom and gloom that surrounds the current market the government must use their own leverage with the media to install confidence back into consumers. It would appear we have been let down by yet another example of ‘quick fix’ politics which will not resolve the issue in the medium to long term.

If you would like more information, please contact Roberts Newby Estate Agents by visiting www.robertsnewby.com or telephone 01753891188 or email sales@robertsnewby.com