As the press media would have us believe, apart from tinkering with VAT, it looks as though Mr Sunak is going to raise the threshold of Stamp Duty as a limp gesture, for a year, to get the residential property market off its knees.
I’m wondering who is, today, advising the Treasury about the state of the residential market? Whoever they may be, the truth is that as a direct result of the government-backed scheme – Right-to-Buy – this has been stoking up the lower end of the market, for some time now and frankly, activity in this sector has been quite brisk and doesn’t really need any further stimulation.
The ‘brick-like constipation’ is actually in the market above £ 3million, particularly in the capital, although also elsewhere in the provinces. Activity in this sector is down by 70% and values down by 40%, in the pre Covid-19 era and since then, even worse
As any financial wizard will tell you, cutting most taxes usually costs the Exchequer money initially, until it hopefully comes back by way of indirect taxation ie VAT, by the stimulation of retail spending which has been in the doldrums of late.
Stamp Duty is one of the very few taxes which brings instant results and he should have the ‘cojones’ to lower the rates from 12%/15% to, say, 7%/9%.
This will immediately stoke-up the marketplace, which will not only help all the battle-weary businesses associated with this sector ie solicitors, surveyors, valuers, estate agents, but also do much good for the retail sector ie white goods/brown goods, which will, on its own, generate a great deal of tax revenue, even without the drop in VAT.
I believe that there could be between £ 5billion and £ 10billion of latent money ready to find its way straight into the coffers of the Treasury and lord knows what other receipts could be enjoyed by this ‘one stroke of the pen’.
The former hapless Chancellor, Osborne, was not aware of the unintended consequences of his Stamp Duty tax reforms in 2014, but this has dropped the Stamp Duty take by 40% from £ 12.5billion to £ 7.5billiion this year and this is at least 61% down from the OBR forecast issued for SDLT tax revenue in 2020, at the time.
With the Chancellor unleashing the sluice gates of spending to counteract the deleterious effects of Covid-19 now approaching £ 300billion, this welcome windfall would be ‘a breath of fresh air’, to raise much-needed money, at this difficult time.
Although this was a political ‘hot potato’ at one point, which the Tories were terrified to do anything about for fear that they would highlight the errors of the last administration, it could be the only instant-effect that is within the Chancellor’s grasp, today.
Rumours were swirling that SDLT in its entirety, would be given a holiday for a year, but actually even as an estate agent, I think this would be thoroughly imprudent and would cause an unfortunate spike in values, which would further affect the plight of the vulnerable and the homeless, today.
Oddly enough, the market between £ 1million and £ 3million, in the last 3 weeks has become very active indeed, but there is very little movement above £ 8million to £ 10million, not assisted by the travel and quarantine chicane making it difficult for the much-needed international market to find its way to the UK.
Mr Sunak, be bold and courageous, shrug off all your inhibitions and create a win-win for everyone in this troubled residential housing sector.
We all welcome the fast-track initiatives to bypass the planning restrictions announced by the government last week, but if you want to breathe life again into the property sector, the aforementioned measures are much needed and not a moment too soon.