RICS warns over stamp duty holiday

The end of the Government’s stamp duty holiday is likely to hit the housing market hardest in regions that are already failing to benefit from the recovery, the Royal Institution of Chartered Surveyors (RICS) has warned.

The majority of Chartered Surveyors in the West and East Midlands, Wales and Scotland expect a slowdown in the residential property market next year - once the stamp duty holiday expires on 31 December 2009.

The holiday was introduced last September with the goal of helping first-time buyers cushion the property market meltdown.

Properties under £175,000 were exempt from a 1 per cent tax, but the return to a stamp duty will see the cut-off fall to £125,000.

In another survey released by RICS last week, surveyors in Wales and the East Midlands recorded more price falls than rises. Average home prices hover in the vicinity of the £125,000 to £175,000 threshold range, making these regions particularly vulnerable to a levy.

”At the time of its introduction, we did question how great an impact this policy would have and judging by the fact that only surveyors in certain parts of the country are particularly concerned about the ending of the holiday, it could be said that some areas of the UK hardly even noticed the change,” said Simon Rubinsohn, chief economist of RICS.

RICS believes that the levy will have little or no impact in London and the South East, since average prices are already much higher than £175,000 stamp duty threshold.

Although some mortgage advisers have encouraged property investors to act quickly before the expiry date, research by RICS indicates that the “holiday” has not forced more buyers onto the market.

Mr Rubinsohn said the additional transaction cost is still a worry to many, especially first-time buyers, citing it as “a threat to the market in the areas of the country that are still seeing a weak price environment.”

RICS said it favours a marginal system where no homebuyer pays anything on the first £150,000 of their new home.

“A return to the status quo will be of benefit to no one, and as such RICS believes that rather than simply reverting back to the old structure for stamp duty, the imminent change provides an opportunity for the government to introduce a wholesale restructuring of the tax,” Mr Rubinsohn said.