Chancellor George Osborne will have been delighted by the joyousresponse to his long overdue reform of the reviledstamp duty tax in Wednesdays Autumn Statement.
He was rightly applauded for scrapping the distorting slab structure of the tax, which saw buyers pay 2,500 on a 250,000 property, but 7,500 if the home cost just 1 more.
Few cared that buyers of 1 million-plus properties will pay a lot more, because they can afford it, cant they?
Chancellors tend to be most dangerous when theyre at their most popular, however. Gordon Brown was lauded as the Iron Chancellor even as his fiscal profligacy corroded the nations finances.
Osborne is laudedtoday, but his reputation could also end up on the scrapheap.
Just when the housing market bonanza seemed to have hit a plateau, his stamp duty reforms look set to drive it to new heights. Given todays sky-high prices and massive consumer debt, thats the last thing we need.
Third Time Unlucky
This is the Chancellors third go at pumping up the housing bubble. His Funding for Lending Scheme (FLS) drove prices higher by handingbanks and building societies billions of cheap money to fund cut-price mortgages.
Osborne inflated the market further with the Help to Buy scheme, that helped borrowers take out more affordable mortgages at loan-to-values of up to 95%.
He has resisted all pressure to rein it in, evidently deciding that adebt-fuelled recovery is better than no recovery at all.
Dead Men Voting
The new system should be cheaper for 98% of buyers, Osborne calculates. But they are unlikely to save much in practice, as sellers look set to respond by pushing up asking prices, especially around each price band.
Under the old system, vendorslost more 230 million a year by reducing the value of their properties to below the various stamp duty thresholds, Zoopla says.
Sellers of properties in stamp duty dead-zones were losing 7,455 per sale on average. Now they are likely to push up their asking prices by a similar amount.
Cheaper stamp duty charges will also tempt more buy-to-let landlords back into the market. So what has been seen as a boost for first-time buyers could only make their lives harder, by pushing prices higher and raising competition at the lower end of the market.
Boom And Bust (Again)
Osborne clearly wants a mini-housing boom in the run-up to the election in May, and will no doubt get what he wants. He can worry about the subsequent bust after the polls have closed.
But the rest of us should be worrying about it today.
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The stock market bull run of the past five years has helped millions of ordinary people boost their pension and Isa wealth.
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