The amount of stamp duty Ministers expect to collect in 2024 has been slashed in light of predictions that housing transactions will halve this year compared to last – a drop one long-serving estate agent says he blames on the "inept attitude of this Government".
The Treasury now expect to collect £40m in stamp duty next year; whereas the estimate in last year’s Government Plan for 2024 was £57.5m, which reflects how the housing market has slowed in the past ten months.
The independent Fiscal Policy Panel (FPP), a group of economists who advise Ministers, have reduced their assumptions for housing transactions and house prices by -50% and -2% respectively this year, with a recovery in the later years of the plan which runs until 2027.
They add that there remains “significant uncertainty” over the impact of interest rate rises for mortgage holders, and how the housing market will evolve after a long period of low interest rates. The UK base rate remains at 5.25%.
Pictured: The number of housing transactions in 2023 is expected to be half of what it was in 2022.
The Jersey housing market has slowed across the board.
At the top end, for instance, stamp duty revenue on transactions above £5m decreased by 70% in the first six months of this year compared to the same period in 2022.
The FPP’s assumptions have been accepted by the Government’s Income Forecasting Group, a body chaired by the Treasurer who predict how much money is coming in each year.
The group predict that the £40m collected next year in stamp duty will rise to £58m by 2027.
In last year’s Government Plan, Ministers introduced a higher rate of stamp duty for buy-to-let investments, second homes and holiday homes at three percentage points above the normal rate for residential property.
This year, Treasury Minister Ian Gorst is proposing a 40% increase to the first-time buyer upper threshold, which reflects the increase in house prices since the threshold was last raised in 2019.
Pictured: Treasury Minister Ian Gorst is proposing a 40% increase to the first-time buyer upper threshold in this year's Government Plan.
In addition to increasing the upper threshold, it is proposed that the 1% rate for first-time buyers is extended to ensure that minimal stamp duty is charged on lower value transactions. No changes are proposed to the nil rate, which means that no Stamp Duty is charged on transactions of £350,000 or below.
These proposals would mean that the stamp duty charged on first-time buyers who are purchasing a property for £500,000 would reduce from £8,000 to £1,500.
To fund these plans, the Government will increase stamp duty rates for properties above £2m by 0.5 percentage points per band.
The fall in transactions – and consequential decline in income for the Government – is a consequence of its own decisions, according to a senior figure in the property industry.
Pictured: Broadlands owner and CEO Roger Trower said that "3% of nothing is still nothing".
Roger Trower, who owns estate agency Broadlands, said: “They have fallen off a cliff because of the inept attitude of this Government. Their policies, including increasing stamp duty on second homes by 3%, has frightened potential buyers off.
“There are no transactions going through the Royal Court, and if there are no sales, developers will not develop, and they will not employ builders and more building firms will go under.
“People will not sell their house if they will not get the money they think it is worth. Of course, the house they want to buy may also fall in value, but the trouble is it costs so much more money to buy a house these days.
“Stamp duty is a stealth tax which works fine when the market is flying, but becomes quickly stuck when it isn’t. This is entirely the Government’s fault.
“They may have increased stamp duty on second homes by 3% – but 3% of nothing is still nothing.”
The recently published Government Plan states that £10m will be spent in 2024 as part of a scheme to increase home ownership. The details of that scheme are expected to be released shortly.
The plan adds that the Government will review stamp duty over its four-year period as a potential "fiscal level" to achieve its strategic housing aims.
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