Darling keeps schtum on stamp duty as mortgage market "hits a brick wall"

08 August 2008 / by Rachel Mason
Alistair Darling refused to make any official announcement about stamp duty last night despite evidence that homebuyers are pulling out of sales due to uncertainty around the subject.

There has been increasing speculation this week that the Chancellor is considering a freeze on stamp duty – similar to the nine month suspension during the last property recession in the early 1990s – in order to put some liquidity back into the faltering housing market.

Although there has been no official word, this week, housing minister Caroline Flint said that the Government was "discussing stamp duty" and Darling said he is looking as a "range of options" to "help people with housing." The remarks provoked widespread speculation that a stamp duty 'holiday' is on the cards.

Estate agents are urging the Government to make a call one way or the other, claiming that potential home buyers are holding back on completing because they think that if they wait, they will be able to avoid paying stamp duty.

The general consensus seems to be that a stamp duty holiday would be welcomed, but that the uncertainty is damaging the housing market further.

One group in favour of a freeze is the Home Builders Federation (HBF). The HBF has been 'championing' a range of proposals to invigorate the housing market for some months and says the idea of a stamp duty holiday would be a welcome initiative.

"It shows that Ministers appreciate the problems the current housing market situation is causing people looking to buy and sell properties, and the impact it is having on the wider economy," said Stewart Baseley, executive chairman of the HBF.

But the HBF says a change to stamp duty rules would not be enough on its own to have any significant affect. Speaking to BBC Radio 4's World at One, John Stewart, chief economist at the HBF said that the government needed to look at a range of options to resolve the mortgage crisis. He said the main problem is a shortage of money available for lending, estimating that lending will be around half what it was last year "we need to address that" he said.

Mr Stewart says that with consumer confidence so low a stamp duty freeze could help, but also needed is a cut in the bank rates and more affordable housing.

When asked if a stamp duty holiday should target any particular part of the market, Mr Stewart replied "first time buyers" but admitted that it would be difficult to design such a package, suggesting instead that the initiative could apply to all homes under £250,000.

"What we need to do is put a floor underneath the falling housing market" he said, because, "affectively, the mortgage market has hit a brick wall."

If the Government does opt for a stamp duty holiday, they would lose serious amounts of revenue; estimates suggest that if the threshold was raised from £125,000 to £250,000 the treasury could lose around £1billion in revenue.

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