Stamp duty concession 'regionally divisive'

Click to follow
The Independent Online

First-time buyers were given an incentive to take the housing plunge - and vote Labour - when the threshold at which stamp duty becomes payable was doubled to £120,000.

First-time buyers were given an incentive to take the housing plunge - and vote Labour - when the threshold at which stamp duty becomes payable was doubled to £120,000.

The Chancellor said the move would help more young people to own their own homes. The number of first-time buyers entering the housing market has fallen by a third in the past two years.

But critics branded the announcement, which will cost the Exchequer £250m, "regionally divisive" for favouring prospective buyers in the North and West. Although 300,000 buyers stand to gain from the tax break, buyers in London will benefit the least, since just 5 per cent of properties for sale in the capital cost less than £120,000. In the North-east, two-thirds of properties sold last year would have escaped the duty, which took effect at midnight last night.

Peter Williams, deputy director of the Council of Mortgage Lenders, said: "Its effect will be muted in southern England where affordability is worst. The starting threshold would be over £150,000 if it had been index-linked since Labour came into office."

Liam Bailey, head of residential research at Knight Frank, the estate agency, said: "With average UK house prices standing at above £150,000, the Chancellor has missed an opportunity to help all first-time buyers throughout the UK no matter where they live."

To pay for the tax break, Gordon Brown abolished stamp duty relief on commercial property in deprived areas - three years after introducing it. This is expected to save him some £340m. He introduced the relief to encourage firms to set up business in 2,000 poorer areas. But the move backfired because it meant expensive buildings in areas such as Canary Wharf and Holborn became exempt.

Kevin Griffin, head of Ernst & Young's stamp duty group, said: "This potentially embarrassing climbdown has been forced on the Chancellor by the risk that, taken with other reliefs and assistance available, it would breach the EU limit on permissible state aid."

Despite average UK property prices more than doubling in the past six years, the stamp duty threshold has been frozen since 1993.

The Chancellor also unveiled plans to boost low-cost home ownership via an initiative with the CML. The sector's trade body wants to extend a scheme which uses public money to provide equity loans for key workers. Under the proposals, the number of people who would benefit from the equity loan scheme would double to 20,000, thanks to an injection of private money as well.

On the anticipated subject of real estate investment trusts - a low-cost, tax-efficientway for people to invest in commercial or residential property - there was the promise of a Treasury discussion paper ahead of their introduction in 2006.

Liz Peace, the chief executive of the British Property Federation, said: "The Government has said it is committed to the introduction of Reits and is aiming for legislation in the Finance Bill 2006. There's a nice feeling throughout this of letting the market decide."

Looking for credit card or current account deals? Search here