Five estate agents operating in the Edinburgh and Lothians area have joined the call for Chancellor Alistair Darling to freeze Stamp Duty levels to "re-invigorate" the local and national housing market.
The Edinburgh and Lothians Property Group (ELPG) which comprises of Warners, The Lints Partnership, Neilsons, Drummond Miller and Leslie Deans & Co say that although Scotland has not suffered as badly as other parts of the UK from the credit crunch, action needs to be taken to protect the "fragile" market.
In a petition handed in to the Chancellor's constituency
office in Edinburgh, the ELPG group urge the MP for Edinburgh West to consider either freezing all
payments or dropping the first £125,000 tier of Stamp Duty.
"We are seeing fewer first-time buyers looking to purchase properties, while sellers are becoming increasingly reluctant to buy first, then sell. There has also been slowdown in sales of entry level properties - caused by the typical first time buyer who can't get a mortgage - and this will have dire consequences for the Scottish economy if the situation continues," say the group in its petition.
"As an Edinburgh MP and homeowner, we would hope you are listening to the concerns of your constituents about the fragile state of the city's property market and the difficulty that first-time buyers are having in the current conditions. We therefore urge you to temporarily suspend Stamp Duty levels to help kickstart our property market before it stagnates further."
Slow Summer
The latest statistics from the Edinburgh Solicitors Property Centre (ESPC) paint a picture of a cooling housing market. Annual house price inflation in Edinburgh at the end of July 2008 was 7.4% with the average home costing £245,415. However, the ESPC points out that the average price was skewed by sales at the upper end of the Edinburgh market.
The average price of a one-bedroom flat in Edinburgh for example rose by just 0.4% from £140,981 in July 2007 to £141,597 in July 2008, while a 1.3% rise took the average price of a two-bedroom flat in the Capital to £188,932. The higher level of demand for family housing was reflected by a 4.9% increase during the same period taking the average price of a three-bedroom home to £269,712.
ESPC statistics for inventory levels are more ominous: at the end of July there was double the number of properties on the market than in 2007 and there were just 500 homes sold in Edinburgh in July, 56% below the same period in 2007.
The average premium over the asking price received on properties sold at "offers over" fell 8% year-on-year to 19% in July 2008, the lowest level recorded since January 2006. Similarly 60% of fixed price properties sold below the asking price, compared with 33% during the same period last year.
Stamp Duty Holiday?
The Chancellor is known to be considering offering first-time buyers a
"holiday" from the tax which brings in £6.4billion in revenue every year into government coffers. However, the proposals are unlikely to be
officially announced before this autumn's pre-Budget report.
The last time a Stamp Duty freeze was implemented was in
1992, when John Major's government decided to act during a dramatic
slow-down in the UK property market
and with the economy struggling with recession. At the time, the government
increased the minimum threshold from £30,000 to £250,000, which exempted the
majority of house purchases. The idea was to reinvigorate the property market and
prevent a total collapse. By the middle of the year transactions had nearly
doubled and, although activity fell off again, industry experts believe the
policy helped put a floor under the market, preventing an even worse slump.
Today, Stamp Duty is charged at one per cent on homes
between £125,000 and £250,000, three per cent over £250,000 and four per cent
over £500,000.
Scott Brown, Estate Agency Partner with Warners, said:
"Even just increasing the minimum threshold of Stamp Duty would have a
huge effect. By giving first time buyers access to extra funding to make their
first purchase less of a financial burden it will release owners of entry level
properties to move up the property ladder.
"And if properties in this sector start moving again
it will help to get things moving again up all levels of the property
ladder."