Jump to content
House Price Crash Forum
Sign in to follow this  
Guest Winnie

A Stamp Duty Holiday? Not That Mistake Again

Recommended Posts

Guest Winnie

http://www.timesonline.co.uk/tol/comment/c...icle4466637.ece

This goes straight to the heart of the Brown-contrived HPI disaster:

Extract

"It isn't hard to see why the Government is desperate to revive the housing market. Gordon Brown is acutely sensitive to the role played by house prices in the mood of voters.

When house price inflation was at its peak in 2003, he changed the Government's preferred measure of inflation from the retail prices index, which includes an element of house prices, to the consumer prices index, which excludes all housing costs. The effect was to move the goalposts for the Bank of England, keeping interest rates lower than they otherwise would have been and allowing the boom to continue. Whenever the housing boom appeared to be flagging thereafter, he pumped money into shared equity schemes, adding to inflationary pressures in the housing market.

Now that the boom is over, the Government has been fishing around for ways of trying to arrest the collapse"

....

"If the Government thinks it can buck the housing market by granting homebuyers a temporary reprieve on stamp duty, it is doomed to a second miserable failure. How can I judge this? Because it is what happened when Norman Lamont, the Conservative Chancellor, introduced a stamp duty holiday in the depths of the last housing crash in December 1991. Housing transactions slumped from 1.306 million in 1991 to 1.136 million in 1992, which remains the lowest figure recorded in the past 30 years. Prices, according to the Nationwide, carried on falling, by 2.6 per cent during the eight months in which stamp duty was suspended."

Share this post


Link to post
Share on other sites
Guest Winnie

The Times are going for it today - here is the very thoughtful Leader (seee esp last paragraph for the flourish)

The Times 6 August 2008

Home Truths

Easing stamp duty would give the wrong signals

Stamp duty on house purchases is a bad tax. There is a strong case for abolishing it and replacing it with something else. There is also a plausible argument for altering the level of stamp duty – up as well as down – in order to smooth fluctuations in the economic cycle. But there is no case for easing stamp duty as a one-off measure to stimulate a weak housing market. That the Chancellor appears to be considering such a move is an indication of disarray in Downing Street.

Economic management under new Labour used to mean adhering to a framework of rules rather than engaging in discretionary interventions. Tinkering with stamp duty would be a populist measure whose most visible effect would be to distort a market that already enjoys favourable tax treatment.

The objection to stamp duty on house purchases is that it is a tax on labour mobility. People who move home in order to take up new jobs ought not to be penalised for their initiative. The housing market as a whole is not highly taxed: VAT is not charged on houses, and homeowners pay no capital gains tax on their main residence. There are thus tax advantages to investing in housing, as opposed to investing in companies that produce goods or provide services. Some of the pain associated with the boom and bust of the housing cycle might be alleviated by ensuring that tax is paid by all homeowners instead of concentrating it among those who move home and thus pay stamp duty. But that is not the debate that the Government is proposing, being interested in reform only as a short-term expedient.

If a proper framework were introduced, stamp duty could respectably be reduced at a time of falling house prices, but increased when house prices are rising. This would imply, however, that seeking to moderate the pace of housing inflation is a worthwhile aim. However first-time buyers might feel, such an aim would certainly not be politically popular with homeowners.

It would also be difficult to achieve in practice. There is recent historical evidence. The Conservative Government raised the threshold for paying stamp duty – from £30,000 to £250,000 – in December 1991, amid a downturn in the housing market. The new threshold remained in place for nine months. There was an increase in the number of transactions immediately before the threshold was brought back to its original level of £30,000 in August 1992. In the next quarter, transactions fell back. It is likely that housebuyers were merely bringing forward their purchases in order to beat the deadline.

There is an appreciable danger that this sort of intervention, so far from smoothing economic fluctuations, might actually aggravate them, as well as putting further pressure on government borrowing.

Altering stamp duty in 1992 was of scant usefulness. The same would be true now. It would also give a damaging signal. It would indicate that the Government sees its role as targeting a particular level of asset prices. Government does not have the type of insight necessary to set a “fair value” for assets. Nor is it legitimate to aid housebuyers at the expense of other sectors of the economy and those who are still priced out of the housing market

Share this post


Link to post
Share on other sites

Great articles, people must be blind if they think stamp duty is what's slowing the market. As far as i'm concerned they can do what they like with stamp duty. Market sentiment has turned, and it'll take a long time to slow down, let alone change course. Labour is doomed, i really can't see what they can do to revive their fortunes in less than two years, and this stamp duty deferral is totally useless.

Share this post


Link to post
Share on other sites
Housing transactions slumped from 1.306 million in 1991 to 1.136 million in 1992, which remains the lowest figure recorded in the past 30 years

That's nearly 100k transactions a month. We're on course to absolutely blow this record out of the water aren't we.

Share this post


Link to post
Share on other sites

Good articles but they don't seem to appreciate that a cut in stamp duty is a direct gift to the vendor rather than purchaser (at least it is in a competitive market, I suppose it is debatable that there is any competition between buyers now!).

The real signal this sends out is that the market is FUBAR and Brown is desperate and flailing. I.e. it gives a firm indication that now is definitely not the time to buy regardless of any tinkering from the Cyclops of Kirkcaldy.

Share this post


Link to post
Share on other sites

Sounds like more fun than Brown's holiday.

Mind you having your ar#e rubbed with a brick would be more fun than being on holiday with him.

Edited by hankdd

Share this post


Link to post
Share on other sites

They ought to scrap it totally, it's a stupid "tax".

Next they'll be taxing petrol and booze!

gB

P.S. Don't worry old beans, the HPC is down to those meanies

in the money markets FINALLY cottoning on to the banks' racket!

A stamp duty holiday won't make a jot of difference...

P.P.S Why don't they tax hoodies and knives instead, and cut taxes on Aston Martins/Lotuses

and watches with a built-in garrot wire?

Edited by goonboy

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.