CHANCELLOR POISED TO STAMP ON PROPERTY PRICES
Copyright 2004 Hull Daily Mail
Hull Daily Mail
March 4, 2004
When the Nationwide confirmed a house price surge of 3.1 per cent in February - the highest monthly figure for nearly two years, since April 2002 - many homeowners across Britain would have considered the possibility of a new car, or a second home in France, writes Jeremy Gates. You could practically hear the stampede to remortgage and unlock some of that cash. But if ever there was a statistic likely to boomerang fast - and painfully - on homeowners, this was surely it.
Within days, the message began to filter out from Whitehall that the madness could not continue.
Before the end of the week, the Financial Times confirmed: "It is time, the Treasury has decided, to put a brake on the runaway train." Although the Council of Mortgage Lenders was pleading, barely 10 days ago, that homeowners shouldn't be bashed for even more cash - the Government's Stamp Duty haul alone soared from £830 million in 1997/8 to £3,590 million in 2003/4 - the fact is that Chancellor Gordon Brown can now inflict whatever taxes he fancies on the property market.
We have also had various suggestions from economists about what is needed to calm the housing market down.
One Oxford economist, Gavin Cameron, backs a tax on housing equivalent to the old domestic rates: about 1 per cent of property value per year. With the value of residential property now reckoned at £3,000 billion, that would mean an annual take of £30 billion next year.
The snag with this approach is that people already pay old-style local rates - in the form of new-style council tax - plus hefty charges for water too, which used to be included in the rates bill not long ago. Council tax is also being rethought, no doubt to be replaced by a formula to produce even higher bills.
Although buy-to-let investors have mortgages totalling £49 billion - up from £24billion in December 2002 - it is wondered if they should delay further purchases until the Chancellor has sat down at the end of his Budget speech on March 17.
You can email me at Gavin.Cameron@economics.ox.ac.uk
Last updated: 15 March 2004.
