Assetz® News - Stamping on the crisis?

Stamping on the crisis?

5th August 2008 |

The last few years have seen persistent calls for stamp duty to be changed in various ways, partly in response to the growing number of people having to pay it and partly because it has been seen as one way of easing the burden on buyers, particularly if targeted at first-time buyers.

All of this has made stamp duty political and from last autumn it has been party political, with the Conservatives pledging to abolish the tax for first-time buyers on any homes costing under £250,000. Since then, the boom and concerns about first-time buyers being left behind by rising prices has been replaced by fear that the housing market will go on declining as the extra costs of higher upfront fees and increased mortgage rates put buyers off.

In this context, many property investors may welcome suggestions that the levy could be about to be eased. Speculation has emerged that the chancellor Alistair Darling will declare a stamp duty holiday - deferring payment of the tax until a later date - to boost the market. Interviewed on BBC Radio 4, Mr Darling did not confirm this, but equally did little to end speculation, stating that he was "looking at a number of measures" that might be deployed.

Not everyone has backed the possibility. Echoing the Conservative policy, shadow chief secretary to the Treasury Philip Hammond told the BBC the Tory plan would take 90 per cent of first-time buyers out of stamp duty, while Liberal Democrat Treasury spokesman Vince Cable opposed any idea of giving stamp duty relief at all, arguing that this would be to "bribe" people into buying houses. He suggested this would mean a greater fall in taxes and that a drop in house prices was a "painful but necessary" way of making homes more affordable.

The industry response was somewhat different to that of opposition politicians. Executive chair of the Home Builders Federation Stewart Baseley commented: "It is a welcome initiative and shows that minsters appreciate the problems the current housing market situation is causing people looking to buy and sell properties and the impact it is having on the wider economy."

Similarly, David Bexon, managing director of new housing firm SmartNewHomes.com, said: "Scrapping stamp duty over the short term is likely to entice a surge of buyers back to the market, keen to save what could potentially be thousands off the value of their next purchase."

However, both agreed that the property market's problems could not be solved by stamp duty changes alone. Instead, they suggested, more still needs to be done to tackle the underlying liquidity problem.

What Mr Darling decides waits to be seen. In the meantime, it appears that however welcome any stamp duty relief may be, the call to action will still focus on the issues of liquidity and - given another Bank of England decision is due this week - on interest rates.