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Stamp Duty cut – latest industry reaction and analysis

Stamp Duty is expected to be cut in tomorrow’s mini-budget and the property industry is mostly delighted – but some point to blind cynicism.

Robyn Hall

Government and Stamp Duty

Stamp Duty is expected to be cut in tomorrow’s mini-budget and the property industry is mostly delighted but not everyone’s popping champagne corks, yet.

As reported in The Neg yesterday Prime Minister Liz Truss and the Chancellor, Kwasi Kwarteng, have allegedly been working on the plans for more than a month and will announce them to the House of Commons tomorrow.

Changes to Stamp Duty often reap rewards. Residential Stamp Duty property transactions between April and August were up 29% compared to the same period last year, figures from HMRC revealed yesterday.

Overall receipts for April to August totalled £8.9bn – some £2bn higher than in the same period the previous year.

The increase is due to the effects of the Stamp Duty holiday which ended in September last year.

Meanwhile The Tax Payers’ Alliance (TPA) dynamic tax model forecasts that if left unchanged stamp duty will continue to have a ‘deleterious’ effect on growth, investment and average weekly earnings if the current system remains in place.

Without Stamp Duty, GDP would be £27bn higher by 2029, investment would rise by £7bn and average weekly wages by £6.

John O’Connell of the TPA says: “Stamp Duty is a highly destructive tax, harming economic growth by impacting decisions like downsizing or moving for a new job. Cutting stamp duty must be part of a menu of measures at Friday’s mini-Budget to help get the economy moving and ease the pressure on taxpayers struggling with the cost of living.”

REACTION

Nathan Emerson, chief executive of Propertymark, says a cut to stamp duty will ease affordability and make it easier for movers in the midst of the cost of living crisis.

emerson

Nathan Emerson, CEO Propertymark

He adds: “This is really positive as the benefits of keeping consumer confidence in the housing market is tremendous for the wider economy and creates encouraging ripple effects across many industries.

“It’s positive to see that the new Prime Minister is making steps to underpin the market, another aspect to be considered is the dire need for long term investors who provide good quality rental homes. It’s not yet known if the proposals to stamp duty would be in place for those buying additional homes as well.”

Liz Truss seems to be emulating Margaret Thatcher. Long may it continue.”

Russell Quirk, property pundit and media man, says for property firms this will be a welcome decision.

He says: “As if the Government credit card wasn’t warping with overuse enough, Truss now hints that she’s going to slash Stamp Duty on home purchase to help growth and prosperity too.

Russell Quirk emoov

Russel Quirk, property expert and media man

“This may well not only reignite a flagging property market but also in turn help pull the economy out of the nosedive that pessimistic economists and ‘experts’ seem to have been predicting (or even wanting).”

Jeremy Leaf

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says talk of a possible cut in Stamp Duty is not altogether surprising.

“Even the relatively modest reduction in transactions is having an impact and the government is all too aware of this,” he says. “A healthy property market is not just good for the housing industry but for the economy generally because it benefits so many other trades and professions, as well as chiming with the government’s avowed intention to promote growth. Any announcement would need to come into effect sooner rather than later in order to minimise compromising existing transactions.”

Andy Sommerville image

Andy Sommerville, Search Acumen

We saw what the Stamp Duty holiday did to the market during the pandemic, and I have no doubt such a move will stimulate demand again.”

Andy Sommerville, director at property data and insight firm Search Acumen, says any such move will stimulate demand.

“We saw what the Stamp Duty holiday did to the market during the pandemic. I don’t think market activity will reach anywhere near the same dramatic peaks as it did in 2021, not least because available housing stock is extremely low. But, without supply-side reforms to boost housing stock, stimulating demand will mean more buyers bidding for the same number of properties, which can only mean one thing for house prices.”

“For conveyancers, an SDLT cut cements a new normal for the sector and, if this policy is revealed on Friday, caseloads will continue to remain high by historic standards; more likely than not, they will get larger. This should provide clear impetus for law firms to re-evaluate their operations.”

Jeremy Raj image

Jeremy Ray, Irwin Mitchell

Jeremy Raj, national head of residential property at Irwin Mitchell, believes stamp duty is a bad tax, both inhibiting the market while being excessively complex and unfair.

He says: “There are not many levers available to the Government right now, but this is a good one to pull. From what we know so far, this is likely to stimulate confidence and activity in the market, both of which are needed in order to help people secure the accommodation that is right for them, and to help prevent further backsliding of the economy.”

Tomer Aboody

Tomer Aboody, MT Finance

Meanwhile Tomer Aboody, director of lender MT Finance, says any stamp duty assistance would trigger further activity, persuading more sellers to come to the market, which in turn would stabilise the price increases we have been seeing over the past few months.

“We have been calling for a reduction in Stamp Duty for downsizers for some time,” he says. “Many feel that the cost of moving is too high and therefore restricts them from selling and freeing up larger family homes so any targeted Stamp Duty reduction for this group would be particularly welcome.”

BROKER REACTION

Mortgage brokers were divided over the latest announcement with some calling the possible Stamp Duty changes a ‘great move’ while others said government should stop interfering in the property industry.

GREAT MOVE

Ashley Thomas, director at London-based mortgage broker Magni Finance, says: “This is a great move by Liz Truss. Not only will it help first time buyers, but if they reduce it across the board, this should encourage movement with properties above £1 million.”

And Robert Payne, director at UK-wide mortgage broker Langley House Mortgages, agrees: “A Stamp Duty cut could offset some of the buyer hesitation and be just what is needed to maintain a healthy balance of supply and demand.”

Get it right however, and in the medium to long term we may just see a market with more transactions rather than one where stamp duty acts as a further disincentive to move.”

Andrew Montlake, managing director of nationwide broker Coreco, says: “The new PM is gambling an awful lot on trickle-down economics, hoping that tax cuts that benefit the wealthy will ultimately also help others in time. We can only hope that any change will be well thought out and permanent rather than another debilitating ‘holiday’ period that adds further fuel to an already raging fire.

“Whatever the change, in the short-term, property prices usually move up to swallow the Stamp Duty saving, which helps no one, certainly not first-time buyers facing rapidly rising mortgage rates and cost of living increases. Get it right however, and in the medium to long term we may just see a market with more transactions rather than one where Stamp Duty acts as a further disincentive to move.”

CYNICAL

But Aman Aneja, mortgage expert at Solihull-based AA Mortgage Services, says: “Liz and Kwasi need to be consulting the property industry, not the mandarins in the corridors of Whitehall. A Stamp Duty cut is not what we’d be proposing as there are higher priorities to be dealt with at this time, specifically how to keep people’s houses warm this winter. All eyes should be on the cost of living crisis, not the property market.”

This is a very cynical move, as house prices are the bellweather of how rich the country feels.”

And Mark Dyason, founder of Edinburgh Mortgage Advice, adds: “This is a very cynical move, as house prices are the bellweather of how rich the country feels. It could be said that people can put up with inflation if their house is going up at the same rate. When you need an intervention to prop up prices then the fall when it comes will only get bigger. Leave the market alone and let it find its level. The pain when it comes will get exaggerated by this kind of artificial stimulus.”

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, wasn’t best pleased either and says: “People don’t need help to move home. They need help to keep and heat the one they have.”

I hope Liz Truss does not fall into the trap of thinking reducing Stamp Duty is the Holy Grail.”

Meanwhile Joshua Gerstler, chartered financial planner at The Orchard Practice, says: “I hope Liz Truss does not fall into the trap of thinking reducing Stamp Duty is the holy grail. Reducing the tax on buying a property will give a short-term boost to the property market but in the long run it is a bad policy that artificially inflates house prices and merely exacerbates the problem.”

WILL NOT HELP

Marcus Wright, managing director at commercial finance brokers Bolton Business Finance, says a Stamp Duty cut will not help the property market much in the current climate.

He adds: “Mortgage interest rates have rocketed in recent months thanks to the Bank of England, and they’re only going to rise higher. This in turn has a massive impact on mortgage affordability and acceptance, which a Stamp Duty cut doesn’t help.”

And Graham Cox, director of Bristol-based Self Employed Mortgage Hub, says: “This is yet another last-gasp disastrous attempt to prop up house prices.The public, and especially first-time buyers, are being played for fools. House prices are too expensive. That’s it. We don’t need help to buy, Stamp Duty holidays or any other hair-brained scheme. We just need lower house prices.”

September 22, 2022

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