Stamp duty doldrums
Tony Ward is chief executive of Home Funding
New enquiries from potential homebuyers are falling; instructions to sell are deteriorating; agreed sales have dropped and prices are flat.
That’s according to the Royal Institution of Chartered Surveyors (RICS).
Last week, it said that a monthly survey of its members revealed that activity in the housing market in November remained subdued, although there was wide variation across regions.
RICS found that homeowners were holding off moving unless absolutely necessary.
New instructions to sell fell for the 22nd month in a row, while the number of sales agreed fell for the third consecutive month.
So far, so depressing. Personally, I don’t think things are as bad as this report initially indicates.
While I accept there are concerns surrounding Brexit uncertainty, this is always a quiet time of year for house-moving activity, so these findings could be skewed.
Even Simon Rubinsohn, chief economist of RICS, acknowledged: “It is perhaps not surprising that the headline indicators for both prices and activity are subdued as Christmas approaches.”
Housing analysts believe that owners are choosing to stay put because of concern that prices will begin to fall, thanks to an economic slowdown and prices hitting the peak of affordability.
Despite seasonal influences, there is one thing that will continue to put a brake on housing activity: the disabling, outdated stamp duty taxation.
The cost of stamp duty at the upper end of the market, is leading some to renovate rather than move, RICS said.
Well, yes. And this is exactly what we don’t need, because at this point the whole supply chain breaks down.
RICS said that the abolition of stamp duty for many first-time buyers, outlined in the recent November Budget statement, should spark a wider debate over the taxation of property.
New buyers purchasing a home of up to £300,000 no longer have to pay stamp duty but RICS said that the move was unlikely to affect the market.
Prices and activity were stagnant immediately after the change. RICS said there was ‘not much evidence’ that scrapping stamp duty for most first-time buyers has increased activity in the sluggish property market.
“It remains to be seen whether the scrapping of stamp duty for first time buyers in the Budget will provide much of a lift for the market. However, if the move does trigger a wider debate about how best to tax property, it will serve a useful role,” Mr Rubinsohn said.
Yes, agreed. As I’ve previously argued, stamp duty is an outdated instrument for raising taxes.
Previously Christian Ulbrich, global chief executive of Jones Lang Lasalle (JLL), said that stamp duty was worsening the UK’s housing crisis by distorting the market and harming long-term development. It was doing little to address a lack of housing supply.
Britain has the highest property taxes of any developed country, figures from the Organisation for Economic Co-operation and Development show.
“For long-term development, stamp duty is definitely harmful, because the stamp duty in itself doesn’t create any value. It’s an additional cost that makes development more unattractive and it has to be considered in the pricing,” Mr Ulbrich said.
However, he noted, increasing supply would help to ‘create an environment where that demand finds a home’. “We need more building,” he said. “Stamp duty doesn’t help to build one single apartment, it just makes it more expensive.”
Changes are definitely needed.
The government has made a start with amendments to stamp duty for many first-time buyers but to me this is still headline-grabbing stuff.
Much more needs to be done. I still believe that there is a much more efficient way for government to raise monies – perhaps replacing the tax with a fairer system that might be a flat-rate paid by both buyer and seller.
We need to free up the housing chain. A property taxation is required that is fair and affordable to all.