Osborne stamp duty hikes are paralysing the housing market
STAMP duty increases introduced by George Osborne are paralysing the housing market and costing the Treasury hundreds of millions of pounds in lost revenue, figures suggest. The number of property sales has fallen by up to 65 per cent in parts of the country as house-hunters baulk at the size of the taxman’s bill.
The fall in transactions is now hitting Treasury coffers, with stamp duty receipts down 7.9 per cent so far this year.
At that rate of decline, the total amount raised by the duty over the full year would fall by nearly £1.1billion, leaving Mr Osborne’s successor Philip Hammond with less cash to pay for vital services.
The Chancellor has already scrapped stamp duty for first-time buyers on homes under £300,000 in an effort to help them get on the housing ladder.
Experts have now said the tax should also be abolished for socalled ‘last movers’ – elderly homeowners looking to downsize – to get the market moving again. Others said the tax should be scrapped altogether. Conor Burns, Conservais tive MP for Bournemouth West, said: ‘We need to create a tax incentive for older people who may still be living in family homes to downsize. This issue doesn’t need an innovative solution, it just needs a tax cut.’
Sam Dumitriu of the Adam Smith Institute, said: ‘Stamp duty may only raise around 2 per cent of government revenue, but when it comes to harming the UK’s economy it punches far above its weight.
‘It is effectively a voluntary tax. You can avoid it as long as you don’t move. And the incentive to stay put extremely strong at the top end of the market. The problems at the top cascade down the property ladder across the country. This traps people in homes that are too big, too small or too far from work. We should ditch the duty altogether.’
Former chancellor Mr Osborne raised stamp duty on expensive properties in 2014, pushing up the cost of moving for anyone buying a house worth more than £937,500. The changes have been particularly felt in the South-East and London.
While those buying a £ 275,000 house saw the stamp duty bill fall by £4,500 to £3,750, the levy on a £ 1.5million property jumped by £18,750 to £93,750.
Stamp duty receipts hit a record £13.6billion last year but the market has now ground to a halt. Sales of expensive homes have been particularly sluggish, suggesting Mr Osborne’s tax raid has backfired.
The taxman received £4.27billion from the duty between April and July, the first four months of the fiscal year, according to the Office for National Statistics. But that was £364million, or 7.9 per cent, less than in the same period last year.
Other ONS figures show the number of property transactions in England fell 19.3 per cent in the year to this April. Sales were down 13.9 per cent in Wales, a similar amount in Northern Ireland, and 9.4 per cent in Scotland. But in parts of the UK sales were down more than 50 per cent.
The Treasury said its cut to stamp duty had already benefited 121,500 first-time buyers.
TO then- chancellor Mr Osborne, hammering the owners of high-value properties with huge hikes in stamp duty must have felt like good politics.
Predictably, however, it has proved not to be good economics, but instead an object lesson in the unintended consequences of interfering in free markets.
Indeed, since he introduced punitive taxes on the sale of homes worth more than £1million, the property market has slumped. Sales are down by as much as 65 per cent in parts of the country and Treasury revenues are down by 8 per cent.
If this trend continues, tax receipts will fall by nearly £1.1billion this year, money which could be used to fund the NHS, police or prisons, which are crying out for cash. Well done, George!