Politicians don't understand history

One of the problems that seems to beset the politicians in this country is the fact that they don't seem to be capable of learning from history. Take the recent example of the stamp duty holiday whereby for the next 12 months those purchasing a property between £125,000 and £175,000 will be exempt from paying the 1% stamp duty. The Tories tried a similar idea back in the 1990's when we had the last recession and they admit that the measure had almost no effect on the property market then. So what is the reasoning over the stamp duty giveaway now?

Firstly the government with typical ineptness started hinting about a stamp duty holiday some weeks ago. For estate agents August is one of the quieter months at the best of times and they needed the uncertainty about stamp duty like a hole in the head. Having dropped heavy hints about the relaxation of stamp duty before thinking things through the government could hardly not do something about it. Now as a fundamental principle it seems wrong that the government should take money from you for the simple act of moving home (obviously though if property stamp duty were abolished tomorrow then they would have to take our money in some other way). But the basic question is - will this measure enliven the sluggish property market and encourage first time buyers? Going back to my first paragraph I would say most likely not.

Let's rewind to some 12 to 24 months ago with property prices going up. Doing something about stamp duty back then when plenty of funds were flowing into the Treasury would have seemed a good and popular thing to do. Last year when the Tories at their annual conference suggested cutting back on stamp duty then Labour asked how they, the Tories, would pay for this. The obvious question is "how can the government pay for this now?". With the stamp duty holiday having been announced will there be a rush to buy? With house prices still falling and with concerns about retaining one's job then I would have thought potential purchasers would prefer to hold on for the moment. The other factor of course is the little matter of shortage of mortgage funds and the business of now having to find a reasonable deposit - just like the old days in fact for those with long memories.

Under present market conditions therefore I don't see the stamp duty holiday being of great use; but Gordon has to be seen to be doing something of course! One of the biggest curses of our property obsessed country is the way that house prices have periodically to adjust to peoples salaries and prospects. Even without the severity of the current 'credit crunch' I think that a massive correction was due.

Some people are saying that the boss of 'The Nationwide' was being too pessimistic anticipating average house prices dropping by 25% from when the downturn started. I'm not sure that he's too far off the mark. We will see over the coming months.

Latest on stamp duty fiasco

This is a video of Housing Minister Caroline Flint doing her best to dampen down speculation of a possible holiday for those house purchasers paying stamp duty. The story doing the rounds now is that Alistair Darling is being made to look indecisive by Number 10 briefing behind his back about this possible payment deferment. If this really is so then it surely demonstrates just how rotten this government is. Lets be charitable though and assume that the idea was to float the suggestion re stamp duty just to see how those affected might react (my previous suggestion of the press making the story up in the first place doesn't I think really stand up to scrutiny). Surely anyone with any experience of life would have foreseen the reaction of buyers to delay things for the moment; estate agents are also furious, they need this uncertainty like a hole in the head particularly in the normally dead month of August.

More and more we see appallingly poor judgment by our political masters. Where will it all end?

Government or Press acting irresponsibly

It was only yesterday I was writing about the way the possibility of a holiday on stamp duty payment had been put about. I usually listen to the review of the daily papers each morning on Radio 4 and I think it was 'The Sun' a few days ago that ran the story that the government was looking at deferring payment of stamp duty in order to reinvigorate house sales. In these particular circumstances I'm sure that it is the new necessity of finding a substantial deposit in order to get a mortgage that is hitting sales more than anything else. However I was very concerned about the way talk of alteration to the stamp duty regime was taking place without any information as to when a decision would be made.

So this evening, half way through the six o'clock news there was a substantial item about the uncertainty and how it was affecting potential buyers and estate agents alike. To me, a perfectly average sort of bloke, it was so patently obvious that we were in limbo land and that those affected wouldn't know whether they should proceed or not. That was the gist of the BBC's story, they interviewed estate agents and had been showered with emails on the subject and everyone was just asking the chancellor to make a decision.

We all know that the government are under tremendous pressure to help "hard pressed families" and will have to be seen to be doing something over the next few months to alleviate the burden. Knowing this then are our crass and irresponsible press trying to make up a policy that Mr Darling cannot ignore or has some off the record briefing occurred to suggest that a payment holiday is being considered. Either way the uncertainty is making the mess that is the current housing market much worse than it need be.

To make matters harder for the vendor he or she is now cursed with providing a 'Home Information Pack' or HIP, a financial outlay before they even go to market (actually I believe the rules have now been altered so that you can get your house on the estate agent's books before completion of the HIP). But another waste of money as I see it, it doesn't speed up the process - delays are normally due to dilatory conveyancers or difficulties getting finance.

Another point I want to make is this: will it solely be the decision of the Chancellor as to what happens about the stamp duty. I can't help thinking that the 'First Lord of the Treasury', one G Brown will be having a lot of say in the outcome.

Postponement of stamp duty may not work

With far far fewer mortgages completing in the UK these days the government understandably are wondering if they can do something to stimulate the housing market. One rumoured idea is that perhaps stamp duty on house purchase might be put off for a while, an idea that the Tories used at the time of the recession in the early nineties apparently. Now I don't know how effective the scheme was back then and would like to know but it seems to me that this isn't a good idea under present circumstances.

The first point I would make is that nothing is likely to happen for a few weeks so that I can imagine quite a few people might wait until a decision is made; on a £150,000 property there is at present 1% or £1500 to pay, in my book quite a chunk of money. I don't understand why options such as this are allowed to leak out, unless of course they want to float the idea and see how the media react first. If, as is being mooted, payment of stamp duty is merely going to be deferred then when and how will the house purchaser actually pay it. Would it be in the form of a lump sum or in instalments. If the former that would not be too popular with a general election on the horizon.

However at the moment surely it isn't consideration of the cost of stamp duty slowing the market right down. No it's the shortage of mortgage funds generally but more significantly it is the cessation of 100% or greater mortgages. With a purchaser, particularly a first time buyer, now having to find a deposit of 10,15, 20 thousand pounds which wasn't something that had to be done before the "crunch" then it's evident that tinkering with the stamp duty will not necessarily have the hoped for effect.

I've said before that Gordon Brown was chancellor whilst economic conditions generally were benign. It is his hard luck now that western economies are faced with horrendous problems and it is difficult to see just what the government, cash strapped as it now is, can do about it.