STAMP duty levels should be temporarily suspended to help kick-start Scotland's stagnating property market. I believe dramatic action is needed to revitalise the market, particularly with first-time buyers, who are experiencing the worst effects of
the credit crunch.
The Government needs to send out a positive message to embattled buyers and sellers either by freezing all payments or, at the very least, dropping the first £125,000 tier of stamp duty so that the tax only applies to properties costing more than £250,000. There is a precedent in 1992 – when Tory Chancellor Norman Lamont introduced a holiday from stamp duty for eight months – which proves such a move is feasible.
The Scottish property market remains resilient with prices and valuations, particularly in Edinburgh, remaining positive, which confirms what many property commentators in Scotland have been saying – that the recent spate of confidence-sapping negative reports largely apply only in England.
However, what we are finding is that sellers are becoming increasingly reluctant to buy first, then sell. When this is added to the slowdown in sales of entry-level properties – caused by the typical first-time buyer's inability to get a mortgage – the market stagnates. That is not a good position for anyone – from the individual homeowner to the Scottish economy in general.
That's why we need a short and sharp "shot-in-the-arm" injection of a freeze on stamp duty to revitalise the market. There are a lot of people out there who are either trying to sell or wanting to buy, who are being affected by the current position in the property market.
Give first-time buyers access to extra funding to make their first purchase less of a financial burden and it will release owners of entry level properties to move up the property ladder.
If properties in this sector start moving again, it will help to get things moving up all levels of the property ladder once more.
In 1992 – with the property market slowing and the economy struggling with recession – John Major's government decided to act on stamp duty, increasing the minimum threshold from £30,000 to £250,000, thus exempting the majority of purchases.
The idea was to reinvigorate the market and prevent a total collapse. By the middle of the year, transactions had nearly doubled. Although activity fell off again, industry experts believe the policy helped put a floor under things, preventing an even worse slump.
Labour has been enjoying a stamp duty bonanza in recent years, thanks to the increasing number of homes whose value has crossed the £250,000 threshold. Before Labour came to power in 1997, stamp duty was worth just £675 million a year. A decade later, it is worth a staggering £6.4 billion.
•
Scott Brown is estate agency partner with WarnersThe full article contains 489 words and appears in Edinburgh Evening News newspaper.
