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Tory stamp duty pledge not enough to save housing market

Catherine Deshayes

Conservative party leader David Cameron has pledged to abolish stamp duty for first-time buyers in a radical move which aims to boost Tory election chances...

The Tories are pulling out all the stops in their bid to become top dog. In the midst of a growing economic crisis which has had a massive impact on global property markets, David Cameron has promised to abolish stamp duty on properties worth up to £250,000, which would help first-time buyers.

Whilst any plan to remove the added burden of stamp duty will be warmly welcomed by prospective homebuyers, sellers and estate agents, it may not be enough to resurrect the ailing UK property market.

As the Tories' suggested suspension would only be temporary, that is likely to encourage some buyers to start purchasing again, and of course, first time buyers will benefit from the saving.

However, whilst the availability of mortgages and buyer confidence remain low, the level of stamp duty is unlikely to have a massive effect. If first time buyers still can't get mortgage, stamp duty savings will have little impact for them.

Chancellor Alistair Darling was criticised for dithering over stamp duty -many estate agents claim this has paralysed the housing market, prompting a 20 per cent fall in prospective buyers.

Now, the Treasury has announced a one-year stamp duty holiday on houses worth up to £175,000, which will save buyers up to £1,750, but the giveaway has done little to brighten Labour's prospects amid mounting evidence that Britain has plunged into recession.

Mr Cameron's pledges mean that nine out of 10 first-time buyers would not have to pay stamp duty, saving an average of £2,000 for some 285,000 people.

Richard Davies, Area Director at Chesterton, told TheMoveChannel.com, "If this did happen, it would be the first positive thing to happen in the property market for some time. The recent lowering of the stamp duty threshold hasn't had much of an effect and almost no effect on the London market.

"However, this won't be immediate. By the time it could come into place, I would hope the market would be on the road to recovery.

"We need something to help the financial situation now. The market, in its current state, will not see a full recovery until the end of 2010. The Tories promise to abolish stamp duty would be another case of too little too late."

"It must also be considered that stamp duty is a large source of revenue for the treasury; would its removal see an increase in other taxes?" Mr Davies added.

The latest announcement from the Tory party reveals its plans to place tax cuts at the top of their priority list.

Mr Cameron said of Gordon Brown, "He should stop dithering.

"He's got himself into a position where he either bottles it or he has given us a hell of a lot of notice of his intentions.

"We've had lots of time to hunker down and plan the election, which has been good. The machine is really ready for an election," Mr Cameron added.

Whilst a stamp duty holiday or suspension will be a popular, attention grabbing idea, alone it will not have the power to get the housing market back on its feet.

Picture by Henkster