← Back to News
Will rising property prices wipe out savings on Stamp Duty?
Chancellor George Osborne had a cunning plan when it came to his reform of Stamp Duty Land Tax.
His own economists “expect that the change will make buying a home more expensive for the average buyer because the lower rate will cause house prices to rise by more than the reduction in Stamp Duty”.
This is the translation offered by Shelter to an impenetrable statement by the Office for Budget Responsibility on the change in rates.
For those good at jargon, here it is: “…for prices, the costing is based on a 1 percentage point change in the average SDLT rate leading to a 1.4% change in the house price. The same elasticity is applied across the price distribution.”
Shelter interprets this as saying that money saved by sellers on the Stamp Duty front will go into the pockets of house sellers in the form of higher prices.
“It’s a bit like a supermarket offering you 20% off, but only after jacking up the price by 30%,” says Adam van Lohuizen of Shelter.
In other words, it won’t really help first-time buyers.
Well, we don’t always find mainstream housing experts to agree with Shelter.
David Newnes, director of Your Move and Reeds Rains, did not suggest that the changes in SDLT will themselves result in house price inflation – indeed, he says that most buyers will be better off.
But he went on to say: “It is not only about today.
“Yes, the majority of buyers will be better off. But these price bands aren’t going to be reviewed again until 2020.
“With house prices rising 10.5% a year according to our latest analysis of the market, thousands more properties will have fallen into higher tax bands by then.
“This element could be seen as cunning use of fiscal drag.”
Below is how Shelter, working to those impenetrable Office for Budget Responsibility guidelines, says property prices will change: basically up, if purchasers are currently buying at below £750,000, and down if they are buying above £1.5m.
http://www.propertyindustryeye.com/rising-property-prices-will-wipe-buyers-savings-stamp-duty/
