THE EFFECT OF STAMP DUTY ‘HOLIDAYS’

 THE EFFECT OF STAMP DUTY ‘HOLIDAYS

Government loses, house prices rise 

In a very intelligent analysis of an SDLT ‘holiday’ in 2010-12 Anne Bolster[1] looked at the effect on prices and transactions when First-Time Buyers (FTBs) were exempted on purchases up to £250,000. 

The result: maybe 2% more FTBs were coaxed onto the market, so transactions hardly increased. She recons that it cost the Government £160,000 for each extra FTB so coaxed to buy a house costing not much more. 

The relief had the effect on prices of FTBs paying more, with the sellers pocketing the increase.

So the Coalition Government of 2010 wasted £300 million trying to ‘help’ a very few FTBs, at great cost. It did help sellers by pushing up prices, just like all the other ‘Help to Buy’ schemes. 

There is only one slight crumb of comfort we can take from this fiasco. This analysis would never have happened if the Coalition Agreement between the Conservatives and Liberal-Democrats had not mandated it. 

It makes one weep to think that this doesn’t happen as a matter of routine on all political wheezes and gimmicks, but then politicians like to hide the evidence of their blunders. 

Thank you Ms. Bolster, and thank you Mr Clegg for demanding the review. Don’t hold your breath for another such review.

One thing you can say for Stamp Duty, is that it is quick and easy for politicians to change it. 

Altering rates of Stamp Duty does not call out screaming opposition from either the newspapers or the tax-paying electorate.

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[1] Bolster, Anne (2011) Evaluating the impact of stamp duty land tax of first time buyer’s relief HMRC Working Paper 13 London pdfHML a gem of a paper!