With the Budget just over a month away, the steady stream of ‘leaks’ continues to grow as journalists and the industry seek to get a handle on what Philip Hammond is likely to announce on November 22.
It’s been interesting to read about what the Budget may (or may not) contain and to hear political commentators suggest that Hammond needs to provide a bold vision, whilst at the same time it would seem that the Treasury does not want to take a particularly radical approach.
I suspect that both the Chancellor and the Government might find themselves sat firmly between two stools on this one because of its minority nature and the continuing influence of the Brexit negotiations.
What we can say is that housing is likely to figure heavily – indeed, if we are to take our lead from the Conservative Party Conference, then we should be seeing a considerable number of housing-related announcements.
As is always the case, speculation about what the Chancellor may (or may not) do with stamp duty is already figuring heavily and just this week the jungle drums have been banged about a potential cut in stamp duty for first-time buyers.
We wait to see how this might materialise – and the detail behind it – but this would certainly chime with the Government’s focus on helping ‘younger people’ who are clearly less enamoured of the Conservative Party than Jeremy Corbyn’s Labour Party.
The devil of course will be in the detail but one also has to wonder whether a first-time buyer-only approach can possibly work, given the changes in stamp duty levels in both Wales and Scotland.
From next April, the starting point for stamp duty will rise from £125k to £150k in Wales, while it is already at £145k in Scotland. And yet in England – where house prices tend to be considerably more in many regions – the threshold starts at £125k, and it’s the same level in Northern Ireland.
It seems somehow inconceivable that – at the very least – Hammond won’t bow down to devolutionary pressures and raise the level from £125k to at least £150k; arguably it should be beyond £200k in England, although such a level might well be only reserved for first-timers.
The major question here however is, how complicated does the Government want to make stamp duty calculations and thresholds – we already have the 3% extra charge for those purchasing additional properties.
Does Hammond want to add a number of new layers, because even if the first level was raised to £200k, this is not going to provide those first-time buyers in London and the South East with much of a saving, especially when you consider that the average first-time purchaser in London is paying £14k in stamp duty.
I suspect that the lowest level of stamp duty will be raised for all purchases, and that first-timers may also get some further cut, perhaps even across the board. Perhaps 1% less for first-timers might be an option?
However, you do also open up a potential can of worms here in terms of determining who should receive the discount – those people who are buying together, but where one party has bought before and the other not, are unlikely to qualify for the discount, and there could be some considerable disquiet about this. Again, not forgetting the administrative burden that is being brought to bear here.
And what about second-steppers? Also, what does this do to increase housing supply? Not a lot. Indeed, with low levels of supply plus measures like an extra £10 billion for the Help to Buy Scheme, the Government might simply be propping up house price levels which are a big part of the problem for first-timers in the first place.
One wonders if the Government shouldn’t introduce a universal threshold rise that all purchasers can benefit from, plus pull back on the extra charge for additional purchasers, if it wants to provide the housing market with a boost.
However, will it be ready to move this far? The take from stamp duty – especially since the addition of the extra charge – has been significant and the Government won’t want to see this diminished too far, plus it can keep to its pledge that it is helping ‘hard-working, younger people’ who feel marginalised that they’re unable to do the things their parents took for granted, such as buying a property.
That being the case, I think all property market practitioners and stakeholders can expect, if not wholesale stamp duty change, then certainly some tinkering around the margins which could well make the whole process of determining who pays, and how much they pay, slightly more complex.
That said, if it does result in an increase in purchase transactions then this would provide a boost and the Government will think it’s a step worth taking. Just how much of a boost however remains to be seen.
*Eddie Goldsmith is Chairman of the Conveyancing Association (CA)