Stamp Duty Cut No Boon as U.K. Home Sales Fall to 13-Month Low

(Bloomberg) -- U.K. Chancellor of the Exchequer Philip Hammond’s efforts to help young people onto the housing ladder by cutting taxes are showing no signs of working yet.

In December, the first full month since Hammond abolished stamp duty for first-time buyers of homes valued up to 300,000 pounds ($418,381), the number of residential properties changing hands fell to 99,100, the lowest since November 2016, according to data from HM Revenues and Customs Tuesday.

“It’s perhaps a little early to gauge the overall effect as there is a time lag in the data and December is not traditionally the strongest month of the year, said Charlie Campbell, an analyst at Liberum Capital Ltd. in London. “However, I wouldn’t expect the changes to have a huge impact on transactions going forward as they only impact a fairly marginal proportion of buyers. To really boost sales, tax cuts would have to be applied at the upper end of the market and second-home buyers.”

The housing market slowed last year, with factors including an inflation squeeze on spending power, Brexit uncertainty and tax changes affecting landlords and owners of second homes.

However, prices remain out of reach for many young voters. The average cost of a first home in London now stands at a record 409,975 pounds, up 66 percent since 2012, with an average deposit of 106,577 pounds, according to lender Halifax. That compares with median gross annual earnings for full-time U.K. employees of 28,600 pounds.

Hammond’s stamp-duty measure, which came into effect on Nov. 22, also applies to the first 300,000 pounds of a home up to 500,000 pounds. It delivers buyers a saving of as much as 5,000 pounds and is estimated to cost the Treasury 600 million pounds a year in lost revenue.

The Office for Budget Responsibility, Hammond’s fiscal watchdog, estimates it will lead to an additional 3,500 first-time buyers and push up house prices by about 0.3 percent.

In the December market survey conducted by the Royal Institution of Chartered Surveyors, contributors were asked whether they had seen an immediate increase in first time buyers inquiries following the changes to stamp duty made in the Autumn budget. An “overwhelming” majority of 86 percent of respondents consisting of chartered surveyors operating in the sales and leasing markets across the U.K. as a whole said that they hadn’t.

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