End of UK stamp duty holiday condemned by real estate industry

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The decision by the UK government to end the stamp duty holiday that is credited with helping to revive the nation’s property market has been widely condemned.

Tens of thousands of sales could fall through when the tax reverts from a concessionary £175,000 to its old level of £125,000 on January 01, it is claimed.

‘A recent survey of our members suggests that the ending of the stamp duty holiday could have a detrimental effect on the recovery of the housing market in regions that are already lagging behind,’ said Simon Rubinsohn of the Royal Institution of Chartered Surveyors. ‘Surveyors in the West and East Midlands, Wales and Scotland believe that they will see a drop in activity in 2010 as result,’ he added.

Real estate consultants Knight Frank has calculated that approximately 25,000 house purchases in 2010 will be delayed or postponed as a direct result of the ending of the stamp duty holiday.

Critics point out that the government has also missed a golden opportunity to reform this tax which they claim distorts the property market because of the steep increases from 1% to 4% on properties of £125,000 to £500,000 or more, and the way it is applied to the whole purchase price not just the excess over a threshold.

‘It is disappointing that the government has yet again avoided making stamp duty fairer by moving from the current system to an income tax style one where the higher rates only apply from their actual starting level,’ said Ray Boulger of mortgage broker John Charcol.

Robert Sinclair, director of the Association of Mortgage Intermediaries endorsed this view saying that the housing market, although showing signs of recovery, needed a further stimulus and that the stamp duty starting point should have remained at £175,000.  ‘The Government should also carry out a full review of the Stamp Duty regime. At present, it both distorts the housing market and places a disproportionate burden on first-time buyers,’ he said.

The Council of Mortgage lenders said it was disappointed and Building Societies also expressed dismay at the removal of the concession.  Adrian Coles, director general of the Building Societies Association said extending the holiday would have provided ‘much needed relief to many first time buyers aspiring to get a foot on the housing ladder.’

James Thomas, head of residential investment at property consultants Jones Lang LaSalle, believes that the removal of the stamp duty incentive could produce a setback for property prices across the board.  ‘There are already signs of the recent resurgence in house price growth slowing and our latest Residential Market Forecast anticipates a fall in average UK house prices of around 7% in 2010 ,’ he explained.

It could be good news though for buy to let investors. ‘The decision is certain to benefit the lettings market, further boosting tenant demand,’ said Phil Calderbank, director at lettingsearch.co.uk.  He believes that with mortgage lending still extremely restricted, first time buyers who failed to take advantage of the stamp duty concession are now likely to postpone a purchase altogether and will continue renting.  ‘Landlords can look forward to a busy winter with few void periods and stable rents,’ he added.

 

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