Home—Blog—Stamp duty giveaway won't prop up house prices
Mar 24, 2010, 03:40
Posted byJohn Stepek
Comments (27)
If you needed any proof that this Budget was all about the election, you just need to look at the main headline-grabber – the doubling of the stamp duty threshold to £250,000 for two years.
This is very political. For one thing, the stamp duty change comes in from midnight tonight. No wonder. The government must have panicked on witnessing the recent slide in mortgage approvals and the corresponding falls in house prices. The recent dip in the market corresponds almost precisely with the end of the recent stamp duty holiday. The Chancellor must be hoping for another rebound in the market to keep voters calm.
Think that's far-fetched? Well, note that the 5% rate on £1m homes doesn't come into action until next April. So there's no danger of damaging the market, even for expensive homes, in the few precious months ahead of the general election. And if necessary, the 5% rate can be reversed should Labour win another term.
It'll be interesting to see how the definition of first-time buyers is policed. But leaving the details aside, is this likely to make much difference to the housing market? You wouldn't think so. Credit remains hard to come by and deposits still have to be high if you want a decent interest rate. And with prices as high as they are, a couple of grand is a drop in the ocean compared to what you should be putting down if you really want to 'get on the ladder' right now.
The real problem is that what first-time buyers really need is exactly what the government doesn't want – lower house prices. And as soon as interest rates start to rise, or the economy goes into a double dip, that's what we'll see.
As housing expert Henry Pryor puts it, "artificially propping up the housing market in a property equivalent of 'cash for clunkers' just distorts the market and delays the inevitable."
Moreover, "with interest rates at record lows, it is irresponsible to encourage property 'virgins' to invest in property when rates can only rise from here, removing the tiny saving that they make on the 'bribe' they took to buy in the first place."
Indeed, "if a 1% saving is enough to convince you to buy a property today then you haven't done your own budget properly."
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(24 March 2010, 05:09PM) Complain about this comment
Here Here to all the above. I like the quote from Pryor.I am a property virgin and I am planning to enter the market in the next couple of years. I cannot see how this duty holiday will genuinely make me closer to buying. House prices need to drop in order to become more affordable. If they do not and they continue with this limp upward trend then they will not become affordable for a number of years.Unfortunately it’s not in the interest of any policy makers to bring house prices down to a level of affordability because they, largely, own at least one home. Usually paid for with expenses from our pockets. A reduction in house prices, however good for the nation in general, will lower their net worth and will therefore be avoided.
(24 March 2010, 07:54PM) Complain about this comment
Moneyweek trying to talk the market down, what a surprise.
(24 March 2010, 07:56PM) Complain about this comment
Where I live in London, one bed flats are on the market for around 200,000 (its not a particularly nice area either). So for a first time buyer to be able to buy one of these they need a min £20,000 (10%) deposit and to earn £45,000 a year (using a 4 times salary multiplier). This is out of reach for the average first time buyer, saving £2,000 in stamp duty is irelevant.
(24 March 2010, 09:12PM) Complain about this comment
What no-one seems to have realized is that this will have no effect on First Time Buyers what so ever.In the UK housing market people pay whatever they can for a house, as much as they will possibly be allowed to borrow from the bank.The amount they are able to borrow hasn't changed so what will happen now is that the 1% saving of stamp duty is more money which they have at their disposal to bid up the price of property.all that will happen on aggregate is that first time buyers will spend 1% more on the actual price of the property they buy rather than that money going to the government. the only person gaining here is the seller, the first time buyer gains nothing at all. Think about it
(24 March 2010, 10:09PM) Complain about this comment
First Time Buyers who've done their homework know we have seen the bull trap/sucker's rally come and go, and now know we're in for the next leg down in prices. And there's nothing that desperate Darling can do to arrest the slide.Anyone who gets seduced by the idea of a couple of grand off will regret it when they see that amount dropping off the value of their property every month as the crash gathers pace...
(24 March 2010, 10:27PM) Complain about this comment
Alex, to answer your question about who benefits, then of course it is the seller, then hopefully for Darling they will feel happy and vote labour.
(24 March 2010, 11:07PM) Complain about this comment
The Media has been talking about the rich owners of million Pound plus houses now starting a brain drain from the UK.I think the brain drain will now begin with the clever bright things in their 30s and 40s who simply refuse to buy a shoebox for 250K and who also to refuse to reward the greedy and feckless who helped drive up UK house prices over the past 10 years.I for one am now seriously planning my escape from the UK - single, skilled, no family in the UK, wish I had not bought that new car last year now... Not prepared to be taxed to the hilt in the years to come, to be taxed to pay the public sector pensions and for the feckless to live in houses whilst I live in a shoebox.I doubt I am alone in thinking this.
(25 March 2010, 07:33AM) Complain about this comment
Why buy now and save 1%? You will save at least that for every 4 weeks you wait. Only a fool would buy a house now!
(25 March 2010, 10:20AM) Complain about this comment
@BobYou are not alone! Australia seems like a good option by all accounts :-) that's where I might take my brain to. Even the USA is a consideration. And Thailand ... I could buy a house outright there!No HPC ... No Stay in UK
(25 March 2010, 10:32AM) Complain about this comment
It's worth doing some sums on what the Treasury thinks the stamp duty changes will mean. The zero rate for two years is estimated to cost a total of £550m, which probably implies a total of 250-300,000 suckers taking on debt they may not be able to afford and risking large capital loss on a geared up basis.The mansion tax is also interesting. If you look at recent Land Registry house price press releases, you can work out that the average £1m+ price is about £1.6m. They expect an extra £90m duty this year - i.e. bringing forward about 1400 sales (90/4%/1.6). They expect a full year will generate revenue of £230m for 1% increase in duty. That implies 14,375 sales at least - but there were only just over 4,000 sales at over £1m last year. I think they got their sums wrong.
(25 March 2010, 11:33AM) Complain about this comment
If I'm selling you my house, rather than congratulate you on your good fortune I say, thanks, I'll have some of that please. Prices (not value) are still way over trend, and showing signs of imminent collapse.Finally, goodbye all you superbrains, I'm with the Prime Minister of New Zealand who said the exodus to Australia had the net effect of raising the IQ of both countries. There are plenty of us thicker and more loyal citizens ready to fill your shoes. I promise we'll try to keep up.
(25 March 2010, 12:29PM) Complain about this comment
What darling has done is put a knife six inches into your back, remove it one inch and ask 'Do you feel better? Look at the favour i have done for you people!'. I dont uinderstand why people pay attention to these politicians. Cant you readers understand that these politicians are corrupt to their eyebrows. Especially darling, to his black eyebrows. They dont care what difficulty we will be in over the next 10 years. Any respect we had internationally has been lost due to the Iraq war. All of our competitive industries have dissappeared. Manufacturing is gone. No jobs left. Just house buying and a depression which is by far worse that 1929 by a factor of 100% at least.Wake up and stop believing these people. They dont care about the population. All of them are corrupt to their back teeth!
(25 March 2010, 02:22PM) Complain about this comment
Alex @ 4 and Mr King @ 8 have summed it up for me. Nothing further to add.
(25 March 2010, 02:27PM) Complain about this comment
Bob @7 totally agree, no future in the UK if you can't even buy what in effect is a room for less than £200k. I know plenty of others who share the same opinion, time to look beyond the UK.
(25 March 2010, 02:33PM) Complain about this comment
I have held on and held on saving hardI have saved 20k and £44k pa job and I live in a shared room to save. I just dont buy into the fact we are near the bottom of property prices or they are stable. This stamp duty incentive will skew the data for a second mini bull trap. Followed by a slow or fast correction.I have taken a Job in Switzerland for nearly twice the money. So a big bye bye to the UK and may be I'll come back if the UK isn't completly fried in 3to5 years
(25 March 2010, 02:49PM) Complain about this comment
Martin @ 9, haha! Please be aware that housing is even more expensive in Australia than it is in the UK.
(25 March 2010, 02:55PM) Complain about this comment
I sold up and moved to Europe buying a house for cash last April. Squeezing a living out of remote working (sucking money out of the UK economy) is much easier than putting up with a government that keeps it population idol or in debt, landless and without access to even a decent tenancy agreement. It is all done so that you don't confront those who are so blatantly exploiting you all. I know who I am NOT going to vote for... yes I can still vote but I still don't know who to vote for. What are you going to do about it? I'm not bright, or young (40) but I could not stand for it. It is not immigration that has ruined our country, that is just a distraction and yes I know without the housing boom I would not have been able to do what I have done but then again I would not have needed to. Sorry to leave you to it.
(25 March 2010, 03:33PM) Complain about this comment
Dumbo @ 11Dumbo, the Labout party is counting on dullards like you to accept the dungheap so that they can keep piling it high (and your support of such mild racism as that of the NZ PM tells us all we need to know about you). Your fief of loyalty to your unelected Leader and the Party that has savaged our economy are as touching as they are foolish, though.We should be cautious in the UK -- if the US and Australia were to moderate their migrationary restrictions, the UK would empty of its brightest and best overnight, leaving a country populated by property speculators, estate agents and welfare dependents (and any remaining 'loyal' Labour voters not in the preceding list).I am in process of move to the US, where everything (food, houses) that costs a £ in the UK costs a $, but where $ salaries are twice as high...When you can identify what, other than house prices, is worth trying to 'keep up' with in the UK Dumbo, do let us all know...
(25 March 2010, 03:48PM) Complain about this comment
DavePage, Before your comment gets lifted, well said. Unfortunately there are plenty more where he came from.
(25 March 2010, 04:50PM) Complain about this comment
Tough measures need to be taken, but are they tough enough?Recognising this perhaps we should all consider what measures we can take to cut cost in other areas, energy use for example. See http://www.youtube.com/watch?v=6ycSc5mLgRM for another view.Roger Lawrie.www.envitae.co.uk
(25 March 2010, 05:09PM) Complain about this comment
Just want to add my support to all those considering emigration. Never mind the rich leaving the UK anyone under the age of 35yrs may as well leave is there's no house price crash. Anyone reading this straight of uni I really would go abroad because even if you get one of the best paid jobs in the country it still won't be enough to buy anywhere to live, so what's the point?Oh and by the way although Australia has seen a big house price boom, you can still buy a lot more than a shoe box for £250k.
(25 March 2010, 05:22PM) Complain about this comment
Joad Family @ 18...where did you go and what is it like? I want to do the same...older than you but more desperate!
(26 March 2010, 08:49AM) Complain about this comment
There are more than a few regular contributors from the infamous HousePriceCrash.co.uk site here. No surprise since this article was leapt upon and posted on there. The number of contributors on said forum has dwindled massively since the property price rebound, leaving only the die hard fanatics who now post an ever decreasing number of articles in making their case for a "HPC", including opinion on house prices in Las Vegas! Guys, stop it. It didn't happen. It should have but it didn't and will not. Having listened to opinion declaring the imminent (while in the hope of) "HPC" for 5 years, I have now capitulated and offered on a 3 bed semi an hour and 20 away from my work in London. My wife and I can build to the side and rear to hopefully insulate against any devaluation and create a home (not investment) that we can live in until we're old if needs be. A word on deposits - we've saved like bijiggery for 3 years and now have 100K to put forward. People can and will do that.
(26 March 2010, 04:36PM) Complain about this comment
@ DoTheCommuteYou won't find me on HPC -- it is indeed full of tosspots who "sold to rent" in an attempt to capitalise on the upside and downside. These people are not better that the BTL scum they villify in my mind. However, house prices have only stopped falling because of the £hundreds of billions of money printing, a 30% devaluation in our currency, and interest rates artificially nailed to the floor in a vain attempt by our unelected leader to retain the vote of his homowner-ist client state. Remove these artificial stimuli and a home may once-again be affordable for the working man or woman, and not before time.If you decide to buy now, good for you, as long as you can afford interest hikes in the future -- if you expect to be subidised in perpetuity by non-home owners through homeownersit economic policy, then you are a participant in the problem
(26 March 2010, 11:05PM) Complain about this comment
@DoTheCommuteWow, 2 hours and 40 minute of each day spent getting to and from work, poor you! I guess that's what house price ramping has led to, people not being able to afford to live close to where they work. I value my time far too highly to waste 13 hours each week just getting to my job!
(07 April 2010, 01:55PM) Complain about this comment
DoTheCommute @ 23 ...If we could save 100K in 3 years, we too would not complain... obviously you're not in the 'average' league.
(21 October 2011, 02:30PM) Complain about this comment
stamp duty must be separate from any political propaganda's,so that our market industry will rise high..we can help you about this matter:http://www.estampduty.com.au/
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