This chart shows house prices having a heart attack.<\/p>\n\n\n\n
The big spike in June 2021 just happens to coincide with the last month of the \u00a3500k stamp duty “holiday”. Buy a \u00a3500k property in June 2021: \u00a30 stamp duty. Buy in July 2021: \u00a312,500. So a nice 2.5% saving. Shame about the 5% price hike in June 2021. Overall, buyers lost out.<\/p>\n\n\n\n
Then another spike before the end of the \u00a3250k nil rate band in October. Buy a \u00a3500k property in September 2021: \u00a312,500 stamp. Buy it in October: \u00a315,000. A 0.5% saving – again swallowed by house price increases.<\/p>\n\n\n\n
These look like irrational results: buyers would have been better off waiting til the holidays ended. But humans are irrational creatures1<\/a><\/sup>Or are they? A smart person suggested to me that a rational buyer might prefer to pay \u00a3525k with no stamp duty than \u00a3500k plus \u00a312.5k stamp duty, because their mortgage lets them spread the \u00a3525k over 25 years; the stamp duty has to be funded in cash. That’s a very cool explanation, but doesn’t make this good policy!<\/span>.<\/p>\n\n\n\n And these prices stick – March 2021 to December 2021, the net effect of the heart attack is a 6% increase (when looking at the chart, remember it’s a chart of house price inflation, not absolute house prices).<\/p>\n\n\n\n Previous stamp duty holidays had less dramatic effects: there’s good evidence<\/a> that the 2008\/9 stamp duty holiday did lead to lower net prices, but 40% of the benefit still went to sellers, not buyers. There’s also been some research<\/a> on the 2021 holiday, but it was completed too soon to catch the September heart attack.<\/p>\n\n\n\n So all of this suggests stamp duty holidays are a bad policy, an inefficient way of helping buyers, and that they perhaps even trigger price rises greater than the tax saving.<\/p>\n\n\n\n A permanent stamp duty change shouldn’t, at least in theory, have as dramatic an effect – a chunk of the benefit would still be swallowed up in higher prices, but we wouldn’t see the heart attack. In the real world, however, I expect we will – partly because some people (rationally) won’t believe the stamp duty reduction is permanent, and partly because some people will (irrationally) excitedly jump on the stamp duty reduction. <\/p>\n\n\n\n The bigger point is that, from a distributional point of view, stamp duty cuts are a way to hand money to those who already have it.<\/p>\n\n\n\n And the bigger conclusion: stamp duty is a terrible tax. As the Mirrlees Review<\/a>2<\/a><\/sup>Which if you haven’t read, you should<\/span> put it:<\/p>\n\n\n Stamp duty land tax, as a transactions tax, is highly inefficient, discouraging mobility and meaning<\/em> I’d scrap it, and replace the \u00a312bn of revenue with increased council tax on high-value properties (not hard, when council tax raises \u00a342bn). Fairer, more efficient, more redistributive, not a bloody transaction tax, and might even help dampen down the property market. More on this to follow.<\/p>\n\n\n\n This chart shows house prices having a heart attack. The big spike in June 2021 just happens to coincide with the last month of the \u00a3500k stamp duty “holiday”. Buy a \u00a3500k property in June 2021: \u00a30 stamp duty. Buy in July 2021: \u00a312,500. So a nice 2.5% saving. Shame about the 5% price hike […]<\/p>\n","protected":false},"author":1,"featured_media":7903,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[88],"tags":[115,144],"jetpack_featured_media_url":"https:\/\/heacham.neidles.com\/wp-content\/uploads\/2022\/09\/image-33.png","_links":{"self":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts\/7901"}],"collection":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/comments?post=7901"}],"version-history":[{"count":2,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts\/7901\/revisions"}],"predecessor-version":[{"id":7905,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts\/7901\/revisions\/7905"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/media\/7903"}],"wp:attachment":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/media?parent=7901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/categories?post=7901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/tags?post=7901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
that properties are not held by the people who value them most…<\/em><\/p>\n\n\n
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