Rumors of stamp duty cuts on Friday as part of the government’s mini budget were described by Edinburgh Mortgage Advice founder Mark Dyason called it a “very cynical move because property prices are a sign of the country’s wealth”.
It was reported this morning that new Prime Minister Liz Truss and Chancellor Kwasi Kwarteng are considering reducing stamp duty, which they say will allow more people to move and allow more first-time buyers to access the ladder of the property.
Truss has made no secret of his wish to cut taxes in a bid to boost Britain’s economy, which is an important part of his leadership bid.
Kwarteng will present the September mini budget, intended to provide economic growth strategies and more details on energy support to ease the cost of living crisis.
Dyason says, “You could say people can handle inflation if their house goes up at the same rate.”
“When you need intervention to support prices, the fall will only get worse. Leave the market alone and let it find its level. The pain when it comes will be exaggerated by this kind of artificial stimulus,” he adds.
Also commenting, the Chief Executive of the Association of Mortgage Intermediaries (Ami), Robert Sinclair, said: “A reduction in stamp duty to propel the housing market would indicate that the government is receiving clear signals that the construction market brand new is likely to struggle with the end of help buy.”
“It can also encourage people to put their existing properties on the market and move. Hopefully any initiative avoids the deadlines we have seen in covid-inspired cuts.
Meanwhile, Mortgages for Business sales manager Jeni Browne said the stamp duty overhaul was “long overdue” but “fantastic for the housing market”.
Browne said: ‘Of course rumors of stamp duty property tax reform have caught our attention, which would keep the housing market from peaking as much as expected over the next 12 months.’
She explains that it would also be “ideal” if the stamp duty rumors included a review and reduction of the 3% surcharge on property to let (BTL) and second homes.
“With all the other tax cuts already on the cards – National Insurance being the main one – Truss will have to balance the Treasury books carefully to fund all the financial support already pledged to tackle the energy cost crisis. “, Browne adds.
Coreco chief executive Andrew Montlake comments: “The new Prime Minister is betting heavily on spillover economics, hoping that tax cuts that benefit the wealthy will eventually help others.”
“The stamp duty is an example and the changes will initially help those buying at higher levels, which they hope could free up inventory further down the chain as people move on. Stamp duty as a concept has been ripe for reform for many years and we can only hope that any change will be well thought out and permanent rather than another debilitating ‘holiday’ period which adds oil to a fire that is already raging.
“Whatever the change, in the short term house prices usually rise to swallow up the stamp duty economy, which doesn’t help anyone, certainly not first-time buyers faced with rapidly rising rates. mortgages and the rising cost of living.
“Get it right though, and in the medium to long term we might just see a market with more transactions rather than a market where the stamp duty acts as an additional deterrent to moving.”
L&C Mortgages Associate Director of Communications, David Hollingworth, explains: “If you had asked me last week if stamp duty would have been the focus of the mini-budget, I would have thought it unlikely.
“We’ll have to wait and see if this will result in a complete overhaul of the bands or reductions in existing fares, but it looks like the changes can be seen as more permanent than the recent holidays which contributed to a surge in demand.”
“The pros and cons of a bank holiday is that of course it causes a ‘buy now’ stimulus, but ultimately causes problems as the deadline approaches.”
“First-time buyers are often at the center of incentives, but the relief remains in place for them unless it is extended to others. There could also be an overhaul of rates on higher value properties, although that would spur comments to benefit those who are well off.
Also commenting, Private Finance CTO Chris Sykes suggests that the effects of a stamp duty reduction depend on the duration of the measure.
“We saw during the pandemic how much the market moved during the stamp duty holiday and ultimately that created some fluidity in transactions. Although only temporary, changes that help people move up the ladder or incentivize downsizing should be considered, and this could have a very positive impact on the availability of housing stock.
“We would welcome a reduction in stamp duty for households looking to downsize, as this would free up much-needed housing stock. We believe that the current lack of larger family homes is partly due to the deterrent effect of stamp duty on purchases for second movers and those looking to downsize, which in turn prevents release stocks.
Sykes also says another consideration is the impact of the tax cut measures on the Bank of England’s base rate.
“An increase in the base rate will likely have a greater impact on those who need to remortgage soon, while those who are locked into a fixed rate and can weather the economic storm are more isolated,” he adds.
Owners and buy-to-let
Speaking about other areas industry participants would like to see mentioned in the budget, Browne of Mortgages for Business says that while unlikely, she “would like to see a grant to help homeowners with the cost of energy-efficient upgrades.” “.
“At the moment, the whole industry is somewhat in the dark: when these proposals will actually expire and how the government expects owners to fund these improvements when estimates indicate that ‘it could be £10,000 per property,’ she adds.
In the meantime, discuss any mention of the Previously published fairer private rental sector white paperBrowne says she has “no hope”.
“I doubt the Tenant Reform Bill has gone much further than the details we had in June, given the current cost of living crisis and the Conservative Party leadership race we have had in the meantime.”
“I hope, for the sake of landlords with properties in England and Wales, that we are not subject to a rent freeze like the one in Scotland because, combined with rising mortgage costs, this could be very detrimental to the private rental sector.”
“However, I appreciate that we’ve already waited almost three years for full details on this white paper, and the patience (and trust) is running out,” she adds.