Stamp Duty Changes - So what? |
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25th March 2010
So, as predicted, in his last Budget, Mr Darling has made changes to Stamp Duty Land Tax. First time buyers purchasing below the new threshold of £250,000 wont pay anything. That affects less than 5% of our sales.
What is of concern is what happens when we near the end of this Goverments 'Special offer'. A rush to buy before the deadline expires? Remember the abolition of double MIRAS (Mortgage Interest Relief at Source) - that went well. Frenzied activity, huge price rises, then collapse.
Properties over £1m will attract an extra 1% in tax - so what? Lets be honest, a £1.1m house will cost an extra £11,000. The buyer will either discount this off the price, or the vendor will have factored this in to the asking price and perhaps offer an allowance to mitigate the increase. When the thresholds of 1%, 3% and 4% were introduced, agents adapted as they always do. What is interesting is that if anything, it may push prices up so that properties are well beyond the £1m barrier.
When the 3% threshold was introduced, properties either sold for £250,000 or were put on the market for £275,000 allowing vendors room to drop to cover this additional expense so as not to deter buyers. Nothing on the market at £260,000 would be very attractive.
If the Government wants to improve the housing market, its not the saving of a maximum of £2500 that will make a difference, after all, this can be added to a mortgage for another £15 a month. No, what is key is the ability of First Time Buyers to actually get a mortgage in the first place.
Even those that have enough savings, job security and income to facilitate a loan find they are exposed to near CIA like interrogation simply to get a Mortgage in Principle. Even then surveyors seem hell bent on 'down valuing' properties to minimise the risk to lenders. I am convinced that the higher the to loan to value, the more likely this will happen.
Recently, one of our offices provided several very recent comparable properties identical to the subject property being valued. Further, the property had been the subject of several asking price offers such was the popularity of the road. The vendor needed a swift sale and was being extremely realistic. The result? A valuation 5% below sale price. This from the same lendor who just days before were reporting an increase in house prices!!
What really counts is the availability of funds to the average First Time Buyer. Affordability is key. Buyers are penalised with higher rates if lenders feel that they are stretching themselves, thus actually stretching them further and increasing their own risk.
Finally, what is more likely to affect the sale of properties over £1m isn't the burden of another 1% in Stamp Duty, rather its the increase to 50% Income Tax for the high earners and the additional burdens on business, NIC contributions and Bonuses.
This Budget has done little for confidence and is as bland as it is political. What we need is stability and the availability of funds from Banks which WE, the taxpayers, own. We don't want another boom, we want consistent, predictable and sustainable growth. I also want cheaper cider, but you cant have everything.
