I agree entirely that the old slab-sided Stamp Duty Land Tax (SDLT) system needed reforming and I have been lobbying for this for some while. Well done George it was long overdue.
The old system was skewering sales, particularly above £2million whereby practically no sales took place between £2 and £ 2.4million in the past two years. I wonder why?
I realise that the headlines, “98% of people in the UK are better off with the Stamp Duty reductions in the Autumn Statement” are good for electoral purposes, but, I don’t believe they will be funded properly (which will add to the deficit) and I question the merits of adding a stimulus to a sector of the market that is doing very well already i.e. up to £500,000. Surely this fuels the housing bubble and makes the arduous task of first time buyers trying to get on to the property ladder, all the more difficult. Help-to-Buy is a good initiative in principle, but extremely limited in scope.
The reason I don’t believe this give away will be funded is that the markets in excess of £5million has been in recession now for 18 months directly caused by the increases of SDLT in the 2012 Budget coupled with the spectre of Mansion Tax. Increasing the Stamp Duty from 7% to 12% (effectively) is a massive increase and will surely stop the market in its tracks since the cost of selling and buying will become prohibitive. Less liquidity, less SDLT receipts.
Example: a person selling a £2million house wanting to trade up to a £4million house will not only need an extra £2million but a further £450,000 now to pay for the Tax (plus estate agents and solicitors fees) which is simply too much for most. A homeowner could spend the £450,000 on extending their own home that will buy them at least 1500-2000 sq ft of new space. They could then sell the property and make a handsome tax-free profit.
This sector is on its knees in London and cannot take a further ‘clubbing’. If the Chancellor is expecting SDLT receipts from this market he will be ‘whistling for it’!
The changes to Non-Dom’s status will also not earn a penny and will be aggravated by the increase in ATED charges (on corporate purchases) of up to 20% in the Autumn Statement. These in aggregate are sending a clear signal to wealth creators from abroad that we are not interested in their money. Not a good thing.
I suppose this is the Tory Party/Coalition’s version of a Mansion Tax but, of course, if the Labour Party return in May 2015, they will just apply a Mansion Tax on top of these draconian changes.
Frankly, to stimulate the sector of the housing market that is already quite buoyant is not a good thing and to damage the sector of the market further that is not doing well is certainly imprudent. So apart from the great advantage of courting popularism for votes at the next Election I’m not sure what good will come from this.
Lest we forget this is a consumer led economy that is dependent on a ‘feel good factor’ that is generated by an orderly property market from the top to the bottom that should be growing by 5% per annum.
Exporters are not doing well so we need as many consumers out there buying goods and services as we can. I do hope for the Tories sake they do garner votes by this Autumn Statement since everyone else will be badly affected apart from the lowest rung of the property ladder.
The tourniquet is tightening around the ‘golden gooses’ neck.