Chancellor Alistair Darling has increased stamp duty on houses worth £1m or more from four per cent to five per cent, adding to the burden paid by the better off, who will soon be paying 50 per cent income tax on earnings above £150,000 a year. The Conservatives would not oppose the increased rate on £1m plus homes, sources said.
The boost to first-time buyers was immediately welcomed by some in the industry who see it as a necessary shot in the arm for the lacklustre property market.
Paul Smith, chief executive of property firm Spicerhaart said: “First-time buyers are the lifeblood of the industry and the wider economy. The new stamp duty threshold is set to strengthen the UK property market more so than any other government initiative in the last few years.”
Others were more sceptical about the effect of the relief in London.
Peter Rollings, managing director of estate agents Marsh & Parsons, commented: “The chancellor’s measures are not going to help first timebuyers looking for property in central London....Only three per cent of the homes we have for sale fit into the sub £250,000 category.”
A number of industry experts also queried just how the new proposal would be policed. Says Ernst & Young tax partner Andrew Tailby-Faulkes: “If you’ve ever had an investment in a property anywhere in the world then you won’t be able to apply for this. That’s going to require a degree of honesty.”
Better-off property buyers obviously stand to lose from the change to the duty on houses of £1m plus but importantly the increase does not come into effect until April 2011, prompting some to suspect there will be an upsurge in activity ahead of the new rate coming in 12 month’s times.
“This will give an incentive to transact between now and April,” said Tailby-Faulkes.
Estate agents Hamptons International said it was disappointed in the increase on stamp duty for £1m plus properties.
The firm said: “The timing of this announcement is unfortunate, coming on the back of the new 50 per cent tax rate and Hamptons expects that this increase will no doubt dampen demand for £1m plus properties, negatively affecting the stability of higher-value property prices at a time when confidence is returning to all levels of the market. “
Shares in housebuilders such as Persimmon rose 4.1 per cent, with Taylor Wimpey up 1.7 per cent, Barratt Developments up 3.4 per cent while Redrow closed up 1.8 per cent.