The facts first. Reports of a stamp duty holiday for all home buyers appear to be wrong.

Instead, the Treasury is considering the “deferral” of stamp duty; just for first-time buyers. They would have to pay the money back in the future, a bit like a student loan.

So not necessarily a big vote-winner then.

More importantly, would a stamp duty freeze kickstart the property market? I doubt it. Sales have frozen because banks will no longer lend as much as a year ago; as simple as that.

So, a typical first time buyer purchasing an average home (£180,000) has a dilemma. Last year he could borrow, say, £150,000. Now he can only borrow, say, £110,000. Unless prices drop further, he has a £40,000 hole in his finances.

Not paying stamp duty on this purchase would save him - falling in the 1 per cent bracket - a mere £1,800.

It’s a token gesture; no more.  

PS

As an afterthought - if anyone doubts me - take a look at almost any newbuild scheme in the UK. A year ago you could get a discount of 5 per cent. Now you can haggle 20 per cent off a new flat.

And still no one is buying.

PPS

We pointed out weeks ago that the stamp duty take is already set to plunge this year. Which is a separate headache for the Treasury. (The £10bn figure includes commercial property)

August 5, 2008 1:39pm in Budget, Gordon Brown, Labour, Recession, UK economy, UK politics | Comment