WHAT HAS THE STAMP DUTY REFORMS from the previous chancellor (Osborne) done to the property market?
So, what’s happened since the onerous reform of Stamp Duty four years ago?
London Central Portfolio last week slammed the government for its muddled handling of Brexit and its increasingly heavy taxation of property - and now, on the day Phillip Hammond reveals his fiscal plans, LCP has this to say…
In a new analysis it criticises the government for delaying the release of stamp duty data for the third quarter of this year - this should have been released at the end of last week but has now been delayed until after today’s Budget.
“Whilst it is likely that the next set of statistics will paint an even grimmer picture, those currently available demonstrate the havoc that has been wrought on the residential market by Hammond's predecessor, George Osborne, through the successive introduction of taxes from graduated stamp duty to higher rate additional duty and the removal of tax relief for buy to let landlords” says LCP.
The consultancy says that now, almost four years after Osborne’s stamp duty reforms, they can be seen to have meant for the UK-wide housing market:
- transactions have actually fallen 34.8 per cent from 250,800 to 163,400 over the last four quarters and this fall has been seen across all price bands
- tax revenues have fallen 25.1 per cent from £2.61 billion to £1.95 billion, and LCP says even adding back first-time buyer’s relief the fall would still have been 19.0 per cent;
- transactions in the new build sector, according to LCP’s latest monthly residential index, have fallen 13.6 per cent in Greater London across the year.
“The introduction of successive tax increases on residential property is creating a black hole in the Exchequer tax take. Its aim of stimulating the domestic housing market does not appear to be working, with a fall in transactions of almost 35 per cent over the year” according to Naomi Heaton, chief executive of London Central Portfolio.
“Whilst the Exchequer could claim that the introduction of the three per cent higher rate for additional dwellings was to reduce the number of second home purchases, the consequence of suppressing this activity is to exacerbate falling revenues, which are down more than 25 per cent over four quarters” she insists.
She claims the government is “blindly ignoring the fact” that reducing investor appetite for higher value sales, particularly in London’s luxury developments, is not freeing up homes for the domestic market.
“With the average price of new builds in London being 31 per cent more than the mainstream market, they will never be part of the domestic heartland. The slowdown in sales, now almost 14 per cent less than last year, simply prevents developers from investing in other sites where more affordable housing can be provided” contends Heaton.
And she concludes with a warning ahead of this afternoon’s speech.
“Hammond may well be tempted to increase property taxes to win ‘the people’s vote’ and to try and plug this black hole. The actual facts, however, are that this is neither certain to increase tax revenues, nor is it likely to stimulate the all-important domestic housing market. It is more important than ever to have a well-thought-out strategic approach, rather than a short-term tactical ploy.”