Jeremy Hunt’s plans to phase out stamp duty cuts contradict ministers’ own efforts to support a struggling housing market, according to property experts.
In his Autumn Statement on Thursday, the chancellor said cuts to stamp duty in England and Northern Ireland announced by his predecessor Kwasi Kwarteng will be phased out from March 2025.
The decision comes as pain in the housing market becomes more apparent, with the UK’s fiscal watchdog predicting prices will fall by almost one-tenth over the next two years.
Stamp duty raised more than £12bn for the Treasury in the year to September — including a record quarter in the last three months of that period — but is regarded by many as a brake on transactions.
Kwarteng doubled the threshold at which stamp duty would begin to apply in England and Northern Ireland to £250,000 in September, in an effort to arrest the housing slowdown.
First-time buyers were also exempted from paying tax on the first £425,000 of their purchase, up from £300,000.
Those measures were among the only aspects of Kwarteng’s programme left intact by Hunt, who replaced him as chancellor last month and set about dismantling the tax-slashing “mini” Budget.
But Hunt said he would now “sunset” the stamp duty cut in 2025, creaating “an incentive to support the housing market and the jobs associated with it by boosting transactions during the period the economy most needs it.”
From April 2025, the nil-rate threshold and first-time buyer exemptions will revert to where they were prior to Kwarteng’s budget.
Critics of the move said it risked exacerbating a housing downturn. The Office for Budget Responsibility expects house prices to fall by 9 per cent between the fourth quarter of 2022 and the third quarter of 2024, largely due to higher mortgage rates.
Higher borrowing costs are likely to overshadow any impact from tweaking stamp duty thresholds, said Lucian Cook, head of residential research at property agent Savills.
Nonetheless, Hunt’s decision “appears to contradict the message sent by the government during the pandemic that a liquid housing market was good for social mobility and had wider economic benefits,” said Tom Bill, head of UK residential research at estate agent Knight Frank.
A Treasury source rejected Bill’s claim, arguing that time-limiting the stamp duty cut would bring sales forward and so prop up the housing market. “It’s the same message [as during the pandemic] — these measures are to encourage sales during a difficult period,” the person said.
First-time buyers are likely to be hardest hit by Hunt’s decision to roll back the tax cut, according to Dominic Agace, chief executive of estate agent Winkworth.
That group is already “bearing the brunt of many external factors — from increased interest rates and cost of living to a lack of rental supply making rents spiral and making it harder to save for a deposit”, he said.
Comments are closed, but trackbacks and pingbacks are open.