Stamp duty relief remains uncertain as housing market continues to fall

07 August 2008 / by Rebecca Sargent
Chancellor of the Exchequer, Alistair Darling has come under fire for failing to act fast enough with regards to rescuing the housing market, particularly when it comes to stamp duty.

Rumours began circulating earlier this week that Darling was considering offering relief from stamp duty for a period in order to relieve some of the pressure being felt in the housing market, particularly by first time buyers.

However, despite the speculation, Darling failed to confirm the rumours about stamp duty during an interview with a BBC radio, claiming that if it did happen it would not be until the pre-budget report in later this year.

As a result, Darling is being criticised for sitting on the fence and leaving several potential options open rather than being decisive. Shadow chief secretary to the Treasury, Phillip Hammond, reportedly wrote to the Chancellor explaining this, claiming that would-be buyers could be deterred from buying if a stamp duty relief is due later in the year.

And, as activity on the housing market is already dangerously low, an incentive to delay buying could make matters worse. House prices continue to fall with the International Monetary Fund (IMF) today predicting a 15 per cent fall by 2010.

First time buyers have undoubtedly been the worst hit by the credit crunch and its impact on the housing market. Mortgage deals have been withdrawn, fees introduced and LTV ratios significantly reduced. A stamp duty break could serve first time buyers well if introduced.

Another scheme currently being considered by the Treasury is the possibility of tax-free savings accounts or ISAs for first time buyers, making saving for a deposit slightly easier.

Speaking of the possible stamp duty relief, Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA), said: "The indication that the government is looking to suspend stamp duty is very encouraging. As an association we have been urging the government for some time to address the current situation facing the housing market by calling for measures such as a stamp duty holiday.

"However, whilst this indication that the government may scrap stamp duty is positive, clear and immediate decisions in this area need to be made. Decisive action is needed today, one concern is that the anticipation of the suspension of stamp duty may halt transactions in the housing market even further until the decision is finalised either way. Finally, although we welcome this news today we continue to appeal to the Treasury to carry out a complete overhaul of stamp duty."

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