Parties chase homebuyers' votes

Housing reform is high on the election agenda. Stephen Pritchard rates the promises
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The Independent Online

Over the last few weeks, the housing market has moved rapidly up the election agenda.

Over the last few weeks, the housing market has moved rapidly up the election agenda.

First off the blocks, the Chancellor Gordon Brown, raised the bar for all the parties in his pre-election Budget by lifting the threshold for stamp duty land tax from £60,000 to £120,000. This has reduced the number of first-time buyers who will pay the tax, but the threshold is still below the UK average house price. Mortgage lender the Halifax estimates that a property that cost £60,000 in 1993 would now fetch £156,000.

Although the Conservative Party has made help for first-time buyers a campaign issue, the most explicit commitment to change stamp duty comes from the Liberal Democrats. As well as the party's much-debated move from council tax to a local income tax, the Lib Dems would raise the starting band from £120,000 to £150,000. This has now been trumped by Michael Howard, the Conservative leader. His party is promising to increase the stamp duty threshold to £250,000.

Labour, for its part, claims that the Budget change exempts 300,000 homebuyers from the tax each year, but the party makes no commitment to further reform. The Conservatives, meanwhile, do not actually make a manifesto commitment on stamp duty. The Green Party, however, has committed to reforming land ownership through a new land value tax.

Apart from stamp duty changes, the main parties also claim they will help those starting out on the housing ladder through changes to social housing. The Conservatives plan to boost shared ownership schemes and also to extend right-to-buy legislation to more tenants.

If re-elected, Labour will bring in a "Homebuy" scheme that will give 300,000 council and housing association tenants the chance to buy an equity stake in their properties. There will also be a first-time buyers initiative to help those who could not otherwise buy. The party would use public land for new homes, with the buyer needing a mortgage for just the building.

The Greens would act to improve the supply of affordable housing, especially in rural areas, by allowing local authorities to use money raised from property sales to fund new development. The Liberal Democrats also want to see public sector land used for affordable homes, and in addition would reform the VAT rules to encourage more developers to take on brownfield sites.

Housing market watchers, though, say that the parties' plans, especially around stamp duty, are designed more to please the crowds than to achieve effective reform of a tax that many observers believe distorts the property market.

The Council of Mortgage Lenders wants to see stamp duty land tax reformed so that it is much more progressive. In particular, the organisation, which represents most of the large mortgage companies, wants the next government to remove the sudden jump from one per cent to three per cent at £250,000 and again to four per cent at £500,000.

Unlike taxes such as income tax, stamp duty is levied at the highest applicable rate. This means that the tax leaps from £2,499 on a property costing £249,990 to £7,500 on a property costing £250,000. This, the CML points out, makes it hard for sellers to market properties that would otherwise be worth between £250,000 and £270,000.

The Royal Institution of Chartered Surveyors echoes this, calling the current stamp duty regime a "slab approach". Instead, it calls for a marginal rate of four per cent over £150,000. This would be charged on the difference between £150,000 and the sale price, effectively smoothing out the market distortion on dearer properties.

More controversially, perhaps, the Institution is also calling for regulation of estate agents. This might prove popular with both hard-pressed buyers and sellers. But, as yet, the measure is not being advocated by any of the main political parties.

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