Ending Stamp Duty holiday could be detrimental, warns RICS
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A return to the previous bands for Stamp Duty, when the current holiday is due to end on the 31 December 2009, could have a detrimental effect on the recovery of the housing market in regions that are already lagging behind, shows the latest research from the Royal Institution of Chartered Surveyors.
More surveyors in the West and East Midlands, Wales and Scotland believe that they will see a drop in activity in 2010 following the end of the Stamp Duty holiday for properties priced between £125,000 and £175,000 at the end of the year. Tellingly more surveyors in Wales and the East Midlands were still seeing price falls rather than rises in the last housing market survey. Meanwhile in the West Midlands, only 3% more surveyors saw prices rising in October.
Overall, however, the majority of chartered surveyors are not expecting the end of the Stamp Duty holiday to have a distorting effect on the housing market despite the benefit it has provided first-time buyers. Unsurprisingly it is those working in London and the South East who overwhelmingly agree that it is not forcing more houses onto the market now, and will not lead to a drop in activity once the old system is re-introduced. However, this is more a reflection on the fact that the holiday has had limited impact in these regions as the average house price is well above that of the stamp duty threshold.
Similarly in the North, where the average price is well below the threshold at £116,051, there is less concern about the impact of the end of the stamp duty holiday. However the regions that are most concerned about the impact are those whose average prices sit well within the margins that are directly affected by the holiday. These are the East Midlands (£133,973), the West Midlands (£142,969), Wales (£134,690) and Scotland (£140,175).
Simon Rubinsohn, chief economist at RICS, says: “At the time of its introduction, we did question how great an impact this policy would have and judging by the fact that only surveyors in certain parts of the country are particularly concerned about the ending of the holiday, it could be said that some areas of the UK hardly even noticed the change.
“However the additional transaction cost is still a worry to many, particularly first-time buyers, and is a threat to the market in the areas of the country that are still seeing a weak price environment. A return to the status quo will be of benefit to no one, and as such RICS believes that rather than simply reverting back to the old structure for Stamp Duty, the imminent change provides an opportunity for the Government to introduce a wholesale restructuring of the tax. Specifically RICS favours moving from the current slab structure to a marginal system with no homebuyer paying anything on the first £150,000 of their new home.”
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