August 6, 2008 | posted by Michael Baxter in House prices |

So the government is considering temporarily lifting stamp duty on the first £250,000 of the price paid for a home. So that means no stamp duty for homes less than a quarter of a million. And stamp duty on the value of the home minus £250,000 for the rest.  It is a desperate gamble. The move will be expensive, and if it doesn’t work, it is money down the drain.

Actually, the move from the government will be the equivalent to it handing people buying properties an amount of money worth 1 per cent of the home’s value. Or if it is worth more than £250,000, £2,500. So that means buyers find themselves getting closer to the deposit they need all the quicker.

The snag is this. It is only 1 per cent. House prices are falling by more than that each month – it is not difficult to see why this may not work.

In the last house price crash, John Major tried something similar – his move failed.

But a more pertinent question is this.

Why does the government want to do this? When house prices were rising too fast, it stayed clear.

If you believe the current housing market turmoil is all a little odd, and solely down to this credit crunch which had nothing to do with us, then the move makes sense.

If you believe house prices are falling because they are too expensive, and the credit crunch is down to lending that was too high, based on property valuations that were not sustainable, then reducing stamp duty would be a fool’s errand.

It seems more likely that this move will just result in a short pick up in opinion polls, followed by the loss of taxpayers’ money – never to be seen again.

Quite frankly, the government would be better off using the money it would spend on reducing stamp duty, giving us all some kind of tax credit.

Vince Cable, the Liberal Democrats’ shadow chancellor, said: “The falls we are seeing in the housing market are painful, but necessary, if homes are to become affordable once more for those not on the property ladder.

“Ministers allowed house prices to get hopelessly out of control. They must not now artificially prop up the market for political expediency.”