Stamp Duty move no remedy for UK property market
In his Budget today the Chancellor has missed a golden opportunity to create more jobs in the housing sector and add prosperity to the market - all of which could have been achieved through fiscal stimulus.said .
While the new measures might sound promising in theory it will have little effect in practice. A £2500 saving on tax is of little relevance when a first-time buyer has to put down £100,000 deposit or can't qualify for finance.
The politically charged "First time buyer's concession" will exempt anyone who has not previously owned property from paying Stamp Duty on a property purchase up to £250,000. This will be effective as of midnight on the 24 March 2010 until 25 March 2012. Stamp Duty is currently levied at 1% of the purchase price on properties worth between £125,000 and £250,000 and all buyers who are not purchasing their first property will still pay this.
The Chancellor also said that this concession would be partly funded by an increase of Stamp Duty of 5% for properties over £1m from April next year.
But there have long been calls for the Government to scrap Stamp Duty altogether, or at the very least reform the seemingly unfair system. The slab-style tax jumps from 1% to 3% on properties above £250k and then to 4% on those homes above 500k. But this system has not been adjusted to allow for the rampant rise in property prices over the last decade and also does not take into account regional variation in house prices.
Potential first time buyers will take little joy out of the news that the annual rate of house price increase currently stand at 5.3% with the majority of property price indices pointing towards further rises this spring. This along with the fact that banks are cherry-picking only those with the very best credit score will keep most in rented accommodation for many years to come.
For the better part of 18 months now we have maintained that the private rented sector in the UK will see strong growth in the short to medium term due to the fact that first-time buyers cannot enter the market and are therefore forced to rent. The Chancellor has said nothing in his Budget speech that changes this. It's therefore fundamental that Government realize property investors, both domestic and international, have an important role to play in providing accommodation to those struggling to get a foot on the housing ladder and start supporting them accordingly.
*Mike Smuts is managing director of Smuts & Taylor
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Article by: Mike Smuts - www.realestateweb.co.za