This anomaly created a psychological barrier to pricing houses in that sector of the market. This reform, with increases to 10% or 12% to stamp duty to the £1million plus range, will be popular with the electorate and the opposition had no choice but to applaud, albeit grudgingly. This will no doubt act as a further stimulus to the growth in house prices, which has slowed over the last few months.
It’s also clear that the long-awaited increase in interest rates will be delayed as long as possible and, even when it does come, is likely to be in gradual small steps, thus avoiding “payment shock”.
In the meanwhile, many high street lenders are still sitting tight, as capital ratios are being tested. For short-term requirements, bridging finance has a great role to play. This also applies to older people, who wish to downsize and don’t want to wait until they can sell their existing home. The reduction in Stamp duty should make it that little bit easier for them to buy a new property. The threat of a so-called “Mansion tax” may also encourage people who are property-rich, but cash-poor to move before the elections in May next year.
Hopefully this will also stimulate house building, which will provide a real boost to the economy, rather than a credit-fuelled retail buying. An interesting development is that Danny Alexander, chief secretary to the treasury, has made a recommendation that the Government should commission building of new homes on state-owned land. Thousands of new homes could be built and the Government would retain any profits made from their sale. Who ever thought that the present Government would be considering this?
Benson Hersch is CEO of the Association of Short Term Lenders
