Property expert Lloyd Davies says the newly-announced Stamp Duty Land Tax (SDLT) cut is “pointless” and will “over-stimulate an already stimulated” market.
Speaking as the new Chancellor Kwasi Kwarteng announced the Government was slashing the SDLT in his “mini-budget” today with the threshold doubled from £125,000 to £250,000 and for first-time buyers raised from £300,00 to £425,000, Lloyd, Chairman of the not-for-profit Conveyancing Foundation, said:
“There is absolutely no point in this measure as we do not need to stimulate the property market. The market is buoyant and property prices are still rising. The issue is one of a lack of supply over demand and so whilst this tax cut is great for those purchasing properties, especially for first time buyers, it does little for a very busy housing market other than to reduce revenue for the government.
Meanwhile, the conveyancing industry is still recovering from the SDLT cuts during the Pandemic, which saw a sustained surge in the market and huge transaction volumes, the backlog of which the industry is still struggling to cope with.”
Davies, also Managing Director of South Wales-based online conveyancing specialist Convey Law, said that many conveyancers, including his own company, could already “take on double the instructions if they had the capacity”. He said:
“Ironically, it has been a case of limiting capacities during and after the Pandemic when we saw the SDLT cuts inflating an already over-stimulated market as many people sought to move for lifestyle reasons triggered by the Pandemic.
Cutting SDLT again will only increase property prices which is unnecessary as the market is currently strong. It will also exacerbate the tough situation the industry is in too where we cannot process transactions legally to an ideal timescale because the demand is overwhelming. Average transaction timelines have increased from 16 to 20 weeks over the course of this year across the industry, largely due to transaction volumes.”
He also questioned whether the markers which have led economists to suggest we are already in a recession are reliable given the post Brexit and post Pandemic world. He commented:
“We are now in a different economic cycle where the markers being looked at to predict recession – GDP and inflation – are, in my opinion, a false barometer of financial stability.
This country has had no time to grow after the last few years, not just because of the Pandemic but also because businesses cannot get the staff to grow, with record low unemployment and around three jobs available to one available person – this figure is worse in the legal conveyancing profession.
We may be in a technical recession if this is based on GDP because the economy hasn’t grown sufficiently but it hasn’t had a chance to grow because of what has been going on in the world – Pandemic – war – soaring fuel prices.
Also, the one cast iron marker of a recession – the state of the property market – suggests otherwise because it is very far from being on its knees! As far as I am concerned, any recession we are in is skin-deep because the property market is booming and we have record employment.”
Davies also criticised the Bank of England’s decision to continue raising interest rates in a bid to tackle inflation in the wake of this week’s 0.5% increase to 2.25%, a figure not seen since 2008. He added:
“Raising interest rates too high will not only affect households concerned about their rising mortgage costs, particularly those not on fixed rates of course, but will also stop people spending when we need people to buy goods and services to encourage production, boost GDP and grow the economy out of recession. It will also bump up the cost of borrowing and potentially prevent businesses investing. It is also inflationary?
The rationale of raising interest rates does not make sense in this financial climate. The government are reducing the cost of fuel for individuals and businesses and reducing stamp duty to try to reduce inflation and to stimulate the economy. The Bank of England is increasing interest rates to slow down spending and increase inflation and to curtail growth in the economy. Is it me or has the world gone bonkers?
I think this country will rebound in the coming months from this period of high inflation and stagnant GDP without the need for persistent intervention from the Bank of England and the Government – which is ill conceived and creates panic and scaremongering at a time when we need clear and effective financial policy and stability.”
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