Stamp duty two-year holiday is double-edged sword

Published:  25 March, 2010

LONDON: The Budget's announcement of a holiday from stamp duty will boost confidence, but may create problems, too.

Liz Peace, chief executive of the British Property Federation, said: "It will boost confidence in the housing market, but will be of limited value to first-time buyers who typically have to find a deposit of £33 000 at present.

"Raising the threshold will effectively knock 18 months off the 18 years it would take the typical 25- year-old to save a £33 000 deposit.

"If a 1% stamp duty payment is the difference between people being able to afford to buy a house, then they should not take the risk. What we really need here is more homes and better access to finance.

"More worrying is the extra disincentive this will be pose to institutional investors in the private rented sector. While individuals will not pay stamp duty on any investment under £250 000, an institution trading in portfolios might pay 5% stamp duty on small flats they are trading, because of the policy of aggregating transactions.

"The Government is currently consulting on this but it must act to stop this distortion before the 5% rate comes in next year."

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