Overview: Will Gordon kill the golden goose?

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The Independent Online

For first-time buyers, it is not so much a matter of getting a foot on the bottom rung of the housing ladder as trying to grasp it with outstretched fingers. The average house price in England and Wales given by the Land Registry is now £163,584, making home ownership for first-timers a more distant prospect each month. Apart from the figures themselves, none of this is new - which is why the discussion has moved on from bemoaning the plight of young purchasers to looking at ways they can be helped.

One of those is the suggestion that the Chancellor might like to hand out some sort of grant for use as a deposit. Today he has the chance to do that - simply by altering the threshold at which stamp duty is payable. If he decides to raise it from properties worth £60,000 to those worth at least twice as much, he will be handing back around £1,000 to most first-time buyers. As the average-house-price figure demonstrates - and in London it is more like £230,000 - the cushion at the bottom of the market is comfortless. If Gordon Brown could produce a supply of homes at less than £60,000 - the figure at which one per cent stamp duty kicks in - buyers would probably be happy to pay him a finder's fee.

Peter Bolton King, chief executive of the National Association of Estate Agents, believes the Chancellor should go even further and waive stamp duty for first-time purchasers buying properties for less than £250,000, on the grounds that they are key to the health of the UK housing market. "The average first-time buyer now pays more than £1,000 in stamp duty, which is the equivalent to around six per cent of their deposit or two weeks of their annual income."

And it is not just at the lower end that we are seeing stagnation in the market. The leap to three per cent duty on properties above £250,000 and to four per cent over £500,000 is a powerful reason for people deciding to stay put and spend on their current homes. When they come to add up the expenses paid to the estate agent, solicitor, surveyor and removal company, that is bad enough. But add on to that the stamp duty, and you find that the cost of moving from a large family house can be nearly £40,000, of which about half is pure tax. At the top end, a move from a £1.5m property to a £2m one may well cost around £150,000 .

Bolton King explains that the fluidity of the market is affected from the bottom to the top. It is increasingly common for people to choose to add extensions to their current home - a typical 1950s semi, say - rather than to move up to a detached house, which would have been the normal progression at one time.

These abrupt hikes in stamp duty, which could bereplaced with a smooth sliding scale, are also responsible for flurries of activity just below the thresholds. Peter Young, managing director of John D. Wood, estate agents, says that this penalises properties just above the scale, while making those just below more expensive. "The buyer of a £275,000 property is punished to the tune of £8,250, whereas by spending no more than £250,000 they would be paying £2,500 in stamp duty."

Given that people are already inclined to move less often, anything that puts further obstacles in the way of mobility must be a matter for concern.

But, as Bolton King points out, the housing market has proved a golden goose to the Chancellor. "Stamp duty has risen from £830m in 1997/98 to an astonishing £3,590m in 2002/03, thanks mainly to rising house prices. Just by leaving the unfair thresholds in place, he is in fact raising tax because house prices are far outstripping inflation, which is running at under two per cent." Is is too much to hope that payback time might start today?

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