25
Mar
The Chancellor Giveth and the Chancellor Taketh Away
Hayward Tod Comment on the Budget
The 2010 Budget was, overall, rather neutral for the property
market. But there are some winners and losers. The increase in the
Stamp Duty threshold - doubled to £250,000 - will help first
time buyers in more expensive areas of the country, but will be of
little or no benefit to those in lower cost areas where most
properties for first rung buyers are below the previous Stamp Duty
level.
The government says this move will help nine out of ten buyers
in the sector, but as many of these people are buying again after
relationship breakups or financial distress it is hard to agree.
Certainly as this tax break only affects those who have never owned
property before - including couples where one has previously been a
property owner - there will be many who will not benefit from this
initiative.
But, as this is effective immediately, there will be quite a few
buyers about to complete a purchase who will be celebrating a
windfall, and others who will welcome up to £2,500 to put
towards a deposit rather than see it disappear into the
government’s coffers. After all, one of the most difficult
things to do when buying a property in these mortgage-strapped
times is to gather together enough money for a deposit.
At the other end of the scale Stamp Duty will be raised to 5 per
cent on property being bought at over £1 million. Again this
will affect those in the more costly parts of the country. But
don't expect lots of cynical price reductions any time soon to
tempt those eager to avoid paying extra tax. This move does not
come into effect until April 2011 so there is plenty of time to
move up, down or across market in this sector before the tax axe
falls.
Will either of these measures greatly affect the property market
in the short term? There will be an opportunity for more first time
buyers so long as there is a continued improvement in mortgage
availability and some less harsh income and deposit conditions.
This in turn could help stimulate the remainder of the market by
creating more movement. The top end of the market is all too often
reported on as if it somehow powers the rest. It does not. The
market works from the bottom up.
So if there is anything for the property sector to celebrate
from this Budget it is that it may lay some foundations for a more
buoyant market in the future. But whether the chancellor sees this
happen from number 11 is not up to him. It is up to us. Fortunately
for Mr Darling, if he loses his home after the election he and all
his friends in government will have up to a year to buy something
grand before they have to part with the extra tax! Now that's good
budgeting.