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How Will the Budget Affect the Housing Market?

How Will the Budget Affect the Housing Market?

By Peter Barry

This week saw the latest Budget received with very mixed opinions as George Osborne tried to redress many of the issues currently facing the economy. As the old saying goes, ‘you can’t please all the people all the time’ and there has already been a backlash from pensioners and families, who feel that his Budget will squeeze their already straightened finances even further.

In an attempt to tax the super-rich, the Chancellor is introducing a new stamp duty rate for houses priced at £2 million and over. The duty was previously set at 5% and this will rise to an eye-watering 7% – but will it have any discernible affect on the housing market?

At a basic level, most people would argue that paying an additional forty or fifty thousand pounds for a property that’s already costing millions is hardly going to dampen the desire of rich house hunters in their quest to secure a piece of prime London real estate (and realistically, London is going to be most affected by the stamp duty hike). And there’s unlikely to be a lot of sympathy extended towards this small sector of house buyers when a lot of people are still struggling to get their foot on the property ladder. However, if some of these properties are being snapped up as part of international portfolios, postcode status symbols or thrice-yearly weekend boltholes, then buyers with fat wallets might decide to search elsewhere.

Whilst there’s talk of in excess of £1 billion in potential extra taxes to be gained from this move, no one really knows the precise impact it will have on the property market and it’s going to be a case of sit tight and wait and see what happens. At the very least, super-rich clients looking for super pricey pads may well become more discerning and expect more for their money. Properties will have to justify their extra cost and vendors and estate agents will have to work that bit harder to secure sales at this end of the market. There’s also going to be more discussion about which properties can truly push the £2 million price tag. Any homeowner hoping to put their property on the market in the new stamp duty threshold better be darn sure it’s worth it.

At the other end of the scale there was dissapointment that the two-year stamp duty holiday for first-time buyers, which ends today, was not extended. Since March 2010, first-time buyers have not had to pay the 1% stamp duty on properties between £125,000 and £250,000 – a tax break worth up to £2,500.