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Calls grow louder for urgent stamp duty cut to boost property market

Propertymark is the latest trade body to call on the Bank of England to cut interest rates to boost demand for property.

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It sees lower rates as key to increasing affordability levels and consumer confidence, particularly among first-time buyers, as well as ease the financial strains on homeowners in general.

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The news comes as property website Zoopla found that people who are buying their first home are paying an average of £244,100 – this is £20,300 below the local market average.

To read the full article click the link below:

Source: Property Industry Eye

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New stamp duty cut clears first Commons hurdle but opposition MPs voice concerns

The Stamp Duty Land Tax (Reduction) Bill 2022-23 has been introduced and given its first and second readings in the House of Commons.

The reduction of SDLT for certain acquisitions of residential property in England and Northern Ireland, by increasing the threshold below which no SDLT is paid and increasing the thresholds for first-time buyer’s relief was announced at the recent mini-Budget and took effect from 23 September 2022.

MPs voted 288 to 152, a majority of 136, to give the Stamp Duty Land Tax (Reduction) Bill a second reading.

However, some questioned whether the Bill would survive Rishi Sunak’s coronation as Tory leader, with Labour and the Lib Dems suggesting a U-turn may await the legislation in the near future.

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The Bill is one of the few measures which survived the Liz Truss’s disastrous mini-budget following the economic turmoil it caused, alongside the repeal of the national insurance rise.

These cuts to stamp duty will mean that an estimated 43% of transactions each year will pay absolutely no stamp duty whatsoever.

It would increase the threshold for not paying stamp duty from properties worth £125,000 to those worth £250,000.

Treasury minister Felicity Buchan told the Commons the Bill will also expand on the “generosity” of the stamp duty holiday during the Covid-19 pandemic “to ensure that those purchasing their first home pay no stamp duty on purchases up to £425,000”.

She added: “The maximum purchase value for which first-time buyers can claim the relief has also been increased from £500,000 to £625,000.

“These cuts to stamp duty will mean that an estimated 43% of transactions each year will pay absolutely no stamp duty whatsoever. That’s up from 25% before the provisions of this Bill.

“No one purchasing a second home or investing in a buy to let property will be taken out of paying stamp duty as the 3% surcharge on the purchase of additional dwellings will continue to apply.”

Buchan told MPs that the Bill would “will allow more people to buy and to move each year”, adding: “This will also mean more business for painters, decorators, moving companies, plumbers, electricians and all of the industries reliant on a healthy housing market.”

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Shadow Treasury minister James Murray criticised the government for delaying the remaining stages of the Bill, which were due to be considered this week.

He said: “This last-minute flip flop of parliamentary business sends a message that it is open to the new prime minister and whoever his chancellor might be to change their mind over the stamp duty changes.

“By delaying the Bill’s remaining stages, the government has introduced yet more uncertainty into the housing market which frankly is the last thing anyone needs.”

Murray added: “At a time when our economy is reeling from the long-term damage the Conservatives have done, when current and future homebuyers are facing spiralling and prohibitive mortgage costs, and when we are still flying in the dark as the Tories have refused to publish the OBR forecasts, it is not the time to spend £1.7bn a year on this tax cut.”

Liberal Democrat MP Tim Farron told the Commons: “It is very hard to support a proposal which is the sole, straggling survivor of a disastrous mini-budget and one suspects the only reason it has survived is because the people who are hurt by it are people who live in communities the Government think they can take for granted. Well they can’t, and they mustn’t be allowed to do so.”

The former Lid Dem leader added: “I do not understand why the government is clinging on to this proposal which will do such little good even for those people it will help, and such amount of harm to those it will do harm to, when it has the chance to think again.

“I would urge them very strongly that they should do just that.”

By Marc Da Silva

Source: Property Industry Eye

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UK house prices hit record high as stamp duty cut powers market

UK house prices hit a record high in August after pent-up demand and the stamp duty holiday combined to power the market upwards, according to lender Halifax.

However, Halifax cautioned that prices were “unlikely” to continue on their current path, with rising unemployment set to catch up with the market.

Prices rose 1.6 per cent month on month despite the UK being hit by the worst recession in modern history. That meant prices were 5.2 per cent higher in August than they were a year earlier, Halifax said.

The surprising surge in prices has now been confirmed by numerous sources. Last week, building society Nationwide said UK house prices jumped two per cent in August to hit an all-time high.

“A surge in market activity has driven up house prices through the post-lockdown summer period,” said Halifax managing director Russell Galley.

He said the rise has been “fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty”.

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Tax cut has desired effect on UK house prices

The rise will please the government, which had sought to boost the property market. It increased the threshold at which buyers pay the stamp duty tax to £500,000 from £125,000 until the end of March.

Britain’s housing market was frozen in April and May. After it reopened in June, many who had scrapped plans to move put them in motion again. The market has also been helped by a rise in savings during lockdown.

The jump in prices now means the average UK house costs £245,747, according to Halifax. That is good news for property owners, but will hurt first-time buyers.

Lucy Pendleton from estate agents James Pendleton, said the figures confirm “the red hot finish to the summer suggested by the Nationwide last week”. She added: “The typically more bullish Halifax index hasn’t disappointed.”

However, Galley warned that the price surge is unlikely to be sustained in the medium.

Prices could fall three per cent by next year

“The macroeconomic picture in the UK should become clearer over the next few months as various government support measures come to an end,” he said.

Economic forecaster the EY Item Club predicted UK house prices could fall by three per cent by early 2021.

Howard Archer, chief economic adviser to the Item Club, said: “Housing market activity may well see a further pick-up in the near term providing some support to prices.”

But he added: “The current marked pick-up in activity and firming of prices will prove unsustainable before long.” He said the “upside for the housing market” will be “limited by challenging fundamentals for consumers”.

Andrew Burrell of Capital Economics said: “Pent-up demand will soon be expended.”

He added: “A weak economy, cautious lenders and the end of the stamp duty cut will weigh on prices.”

By Harry Robertson

Source: City AM

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Stamp duty cut sees London house sales rocket 27 per cent

The stamp duty holiday has significantly boosted London’s housing market, with new sales agreed up by over a quarter in just two weeks, new data has shown.

UK house prices rose 0.2 per cent in June as a jump in demand for houses outstripped a fall in the number of sellers, the figures also showed.

But the market has still taken a big hit this year, said property website Zoopla, which compiled the data. Housing sales in 2020 so far are around 20 per cent below the same period in 2019, amounting to around £27bn in lost deals.

Chancellor Rishi Sunak earlier this month unveiled a “holiday” for the payment of the stamp duty property tax in a bid to boost the market and the economy. This raised the threshold at which stamp duty is paid from £125,000 to £500,000 until March 2021.

The move has spurred activity in London, according to Zoopla’s data, with new sales agreed up 27 per cent over the last two weeks. That compares to a six per cent rise across the rest of the country.

Zoopla said this was because London’s higher house prices meant it stood to benefit relatively more from an increase in the tax threshold.

London and UK house prices continue to rise

Overall, London house prices rose 1.7 per cent in June – before the stamp duty cut came in – compared to a year earlier.

Month on month prices flatlined. This meant the average London house price stood at £479,300.

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UK house prices as a whole were up 2.7 per cent year on year, although the monthly growth rate halved to 0.2 per cent. The average UK house price is £219,500.

The rise in prices “certainly seems at odds” with a cratering economy and rising unemployment, said Richard Donnell, Zoopla’s research director.

Yet he said the release of pent-up demand for new houses after the market was put on ice during lockdown would likely support prices for the rest of the year.

In London, buyer demand is up 28 per cent in 2020 so far compared to the same period a year earlier. This was partly because Brexit subdued activity last year.

Supply has fallen 11.2 per cent, however, meaning relatively higher demand is pushing up prices.

House prices expected to fall by 2021

But Zoopla said prices were likely to eventually fall as job losses and uncertainty take a toll.

“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021,” Donnell said.

“The impact on pricing looks set to be pushed into 2021 as a result of sizable government support for the economy.”

However, Zoopla’s data laid bare the damage that has already been done to the housing market, despite London and UK activity being boosted by the stamp duty cut.

The closure of estate agents over the lockdown reduced new supply and agreed sales by 90 per cent.

So far this year, sales are 20 per cent below 2019 levels. Roughly 124,000 sales that were expected to take place and could have been worth £27bn since March did not happen.

Zoopla said it expects sales to be around 15 per cent lower in 2020 than they were last year.

By Harry Robertson

Source: City AM