Stamp duty: Empty gesture

David Budworth

Desperate times require desperate measures but, for many first-time buyers and struggling homeowners, today's package of measures designed to kick-start the housing market is not extreme enough.

The stamp duty holiday and measures to help homeowners avoid repossession are a step in the right direction, but will barely make a dent in the crisis facing the housing market.

House prices are falling at their fastest for 18 years, an annual rate of 10.5 per cent according to Nationwide Building Society, and sales have fallen off a cliff.

In July last year, the number of mortgages approved for house purchase stood at 114,000. In July this year just 33,000 home loans were approved — a fall of 71 per cent and the lowest recorded by the Bank of England since records began in 1993.

A one-year stamp duty holiday on properties that cost less than £175,000 may encourage some wary buyers to dip their toes in the market, but most will not be so easily duped.

Raising the threshold won't make the slightest difference to many Londoners or prospective first-time buyers in the South East where £175,000 won't buy you much more than a cupboard.

In the Midlands and the North, where properties are more affordable, more buyers will be able to benefit.

However, the one-year increase is unlikely to be much incentive to anyone who wasn't planning to buy anyway. The suspension of stamp duty would save someone buying a £175,000 home £1,750; small fry in the greater scheme of things.

The fundamental factors undermining housing market activity are the availability of mortgages and buyer confidence, not the level of stamp duty.

Total mortgage lending has slumped because the market in mortgage-backed securities, which was used to fund about 40 per cent of all home loans, has effectively closed. This has pushed mortgage rates higher and encouraged lenders to require larger deposits. If first-time buyers are unable to find a mortgage, saving a couple of thousand pounds in stamp duty will not make a scrap of difference to their ability to buy.