Stamp duty freeze – quick fix or real boost for property market?
In response to the threat of a further downturn in the UK property market, the government has announced the suspension of stamp duty on properties worth £175,000 or less for a 12-month period.
[ClickPress, Fri Sep 05 2008] In response to the threat of a further downturn in the UK property market, the government has announced the suspension of stamp duty on properties worth £175,000 or less for a 12-month period. This raises the threshold on which 1% stamp duty is paid by house buyers from its current level of £125,000.
The stamp duty freeze, which came into effect on September 3rd, will save an estimated half a million buyers up to £1,750.
The government believes that around half of all residential property sales will now be exempt from stamp duty, as around half of the 90,000 completed home purchases each month are on properties worth £175,000 or less. The average price of a home in the UK was just under £165,000 last month, according to Nationwide.
The suspension of stamp duty is part of a package of measures aimed at stimulating the housing market, including help for first-time buyers and for home owners facing possible repossession. First-time buyers whose household income is under £60,000 will benefit from being able to purchase a property with a free equity loan of up to 30% of the property’s value. For those facing repossession, several options will be made available, including selling their property to a registered social landlord (RSL) who will pay off the mortgage and then rent it back at a level they can afford.
Also, local authorities which manage their own housing stock will be able to apply for government grants to build social housing. Around £100 million will be made available to help with mortgage interest payments, aimed at helping people remain in their homes.
The suspension of the tax will cost the government around £600 million in lost tax revenues.
The move was welcomed by estate agents – including the UK’s largest mortgage lender, the Halifax – as they have argued that uncertainty over whether the tax would be suspended has been putting off potential buyers from making purchases. Critics, however, such as the Council of Mortgage Lenders, said the move does not go far enough, and questioned whether the freeze would be enough of an incentive to encourage potential buyers to enter the market in such uncertain times.
Other critics see the move as simply a quick fix, arguing that although the freeze might help in the short term by making more houses more affordable, it doesn’t address the underlying problem of helping average earners to get on the property ladder without becoming burdened with enormous debts.
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