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.