End of Stamp Duty Holiday Not Even on the Richter Scale
Well, unless you have just moved out from under a rock you will know that Alistair Darling read his statement today, on the pre-budget report. His words were aired live following Prime Minister's question time, live on BBC2 and several other Beeb channels today.
Though the economy itself affects the property market, and anything that will affect the economy in some way will indirectly affect the property market, the only part of the report that really has the potential to impact the property market is the Stamp Duty holiday not being extended past its December 31st end.
This is being hailed as having the potential to derail the current signs of recovery in the housing market, but in reality it doesn't even register on the same chart as the other problems the market faces in 2010.
Some are arguing that the reduction in banker bonuses, because of the 50% tax levied on the issuing bank will also have an impact. While this is true, it will only affect Central London, which has skewed the overall picture of UK house prices for far too long anyway.
So, back to the stamp duty holiday: since September 2008 stamp duty has only been levied on properties bought for more than £175,000, previously it was paid on any purchase over £125,000. This is widely agreed to have been at least partly responsible for the slight increase in housing demand this year.
From January the first the stamp duty will revert back to its original state, and anyone buying a property priced at £125,000 or more must find an additional 1% of its value.
This is being hailed as having the potential to derail the current signs of recovery inthe housing market, but it just isn't true. The increased demand isn't even responsible for the so called recovery in the first place. In fact, even the Royal Institute of Chartered Surveyors accepts the fact that house prices should still be falling with the current transaction volumes.
Were it not for the fact that the slight increase in demand has been met by a far more severe contraction in supply -- especially of quality homes in the best areas -- which has pushed prices in some areas up to 2007 levels, then prices still would be falling.
What's more prices should still be falling. I am sorry for the people in negative equity, and for all those who fall into it in 2010. But the fact is UK property is mostly over-priced, and certainly unaffordable for the vast majority of people -- especially first time buyers.
The financial crisis stopping the easy availability of credit was only the catalyst; eventually this correction would have come anyway, as first time buyers were continually priced out of the market. Either that or it would have been our sub-prime borrowers defaulting en masse that would have sparked the crunch, rather than those in the states.
On top of that unemployment still has the potential to get worse, and it will certainly be a long time before it gets better. And on top of that the availability of affordable finance is still nothing more than a hope for the future. With the final point in mind, perhaps it is the 50% tax on banker bonuses that will have the biggest impact. Not in the way mentioned above, but if it does as some fear and reduces lending, not bonuses.
So, on the scale of 1 to 10, the end of the stamp duty holiday does not even register on the same chart as the other problems faced by the UK housing market.
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About the Author: Liam Bailey
Liam is the director of SEO copywriting services company Write About Property
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