When the Government finally unveiled its £1.6billion rescue plan for the housing market yesterday, including a one year suspension of stamp duty for properties worth up to £175,000, it was met with a large dose of criticism.
Experts believe that the plan to raise the stamp duty threshold to £175,000 from £125,000 could do more harm than good for the property market, and that it is merely a 'sticking plaster' that will do little to solve the problems in the sector.
While the announcement is a sure sign that the Government has realised some of the difficulties facing the housing market, critics of the proposal have said that it will do little to ease funding in the overall market, which has been suffering since the credit crunch struck last summer and lending dried up.
"Until mortgage flow increases, I can't see the situation improving", Alex Onnor, head of London real estate at law firm McGrigors, told The Times. Many others have agreed with his sentiments, believing that the stamp duty measure will have a limited effect.
There are concerns about what difference it will have made once the year's suspension comes to an end, and, in the meantime, the effect that it will have on owners of those properties priced just above the £175,000 bracket, with the possibility of buyers putting pressure on sellers to reduce the price so that they are exempt from paying stamp duty
Stamp duty reform is just one part of Labour's £1.6billion plan to ease conditions in the housing market; it is also intended to help 6,000 families that are facing repossession, but housing groups have dismissed this as a 'drop in the ocean', as there will be as many as 45,000 families facing homelessness by the end of the year, according to figures from the Council of Mortgage Lenders.
Downing Street described the measure as an essential package for those facing the business end of the credit crunch, but the annoucnement has been vastly overshadowed by speculation that Britain is well and truly heading into a recession, and controversial comments from the Chancellor Alistair Darling that these are the worst financial times to face Britain for 60 years.
The plan is "so tiny it fits in first-time buyer's flat", was one columnist's criticism of the Government's announcement, satirising Prime Minister Gordon Brown's visit to a young first time buyer's home in London as part of a publicity stunt for the new rescue package.
However, there are those who will benefit from the plans, such as those trying to get on the property ladder and housebuilders, which saw their shares rise sharply yesterday. It will help to sell some of the hundreds of empty new builds which are helping to put the house building trade out of business. Mortgage
lenders will also welcome the stamp duty suspension, as it will encourage more buyers onto the property ladder.
"We welcome the government stamp duty initiative." said Martin Ellis, chief economist at Halifax. "This is a sensible measure and it will help the housing market."
Halifax estimated that in the last year 49 per cent of sales were below the £175,000 mark, compared with the 26 per cent that were priced below £125,000 – so potentially a lot of homebuyers could benefit from the change in stamp duty threshold.
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