End to Stamp Duty holiday for first time buyers
On November 29 2011, Chancellor George Osborne made his Autumn Statement. He revealed that the recently introduced exemption from Stamp Duty would not be extended. It will end as planned on March 24 2012.
Offering exemption from the one per cent Stamp Duty for first time buyers on properties up to the value of £250,000 (ie worth up to a maximum of £2,500) the tax break had been intended as one of a number of Government measures to kick start the economy. However the Government in its Autumn Statement documents says that it has proved ‘ineffective’, as it has not increased the number of first time buyers entering the market. The Treasury has said that it will publish analysis showing this to be the case.
The Royal Institute of Chartered Surveyors claims this is hardly surprising, given that there are so few affordable homes or mortgages available. Yet it warns that ending the relief in four months (as always planned) could lead to ‘a spike followed by a dip in the housing market as buyers rush to take advantage of the relief before March’.
Other reactions have also been negative. The Director General of the Council of Mortgage Lenders, Paul Smee, described the situation as disappointing. He pointed out that while the concession may not have stimulated additional demand, it was a significant help to home-owners entering the market. He says removal of the tax break ‘runs counter to the themes of the new housing strategy.’
Similarly, Wendy Evans-Scott, President of the National Association of Estate Agents pointed out that the number of first time buyers entering the market is at a three-year low and says ‘The Government will need to do more to help the fragile first time buyer market.’.
Adrian Coles, Director General for the Building Societies Association accused the Government of ‘giving with one hand while taking away with another’.
The Government says it is prioritising what it hopes will be more effective measures. It is only days since a number of initiatives were announced (in the document ‘Laying the Foundations: A Housing Strategy for England’) to boost the housing market. These include using tax payers’ money to underwrite mortgages for many
first time buyers, and supporting builders to encourage the provision of more affordable housing. It is estimated that 100,000 families will benefit from the Mortgage Indemnity Scheme, and that the £400million Get Britain Building fund (targetting housebuilding schemes that have stalled because of current financing difficulties) will ‘unlock’ up to 16,000 homes.