If you needed any proof that this Budget was all about the election, you just need to look at the main headline-grabber – the doubling of the stamp duty threshold to £250,000 for two years.
This is very political. For one thing, the stamp duty change comes in from midnight tonight. No wonder. The government must have panicked on witnessing the recent slide in mortgage approvals and the corresponding falls in house prices. The recent dip in the market corresponds almost precisely with the end of the recent stamp duty holiday. The Chancellor must be hoping for another rebound in the market to keep voters calm.
Think that’s far-fetched? Well, note that the 5% rate on £1m homes doesn’t come into action until next April. So there’s no danger of damaging the market, even for expensive homes, in the few precious months ahead of the general election. And if necessary, the 5% rate can be reversed should Labour win another term.
It’ll be interesting to see how the definition of first-time buyers is policed. But leaving the details aside, is this likely to make much difference to the housing market? You wouldn’t think so. Credit remains hard to come by and deposits still have to be high if you want a decent interest rate. And with prices as high as they are, a couple of grand is a drop in the ocean compared to what you should be putting down if you really want to ‘get on the ladder’ right now.
The real problem is that what first-time buyers really need is exactly what the government doesn’t want – lower house prices. And as soon as interest rates start to rise, or the economy goes into a double dip, that’s what we’ll see.
As housing expert Henry Pryor puts it, “artificially propping up the housing market in a property equivalent of ‘cash for clunkers’ just distorts the market and delays the inevitable.”
Moreover, “with interest rates at record lows, it is irresponsible to encourage property ‘virgins’ to invest in property when rates can only rise from here, removing the tiny saving that they make on the ‘bribe’ they took to buy in the first place.”
Indeed, “if a 1% saving is enough to convince you to buy a property today then you haven’t done your own budget properly.”