Next week’s PBR should extend the stamp duty holiday to help first time buyers

By Jessica Asato / @Jessica_Asato

Next week’s Pre-Budget Report should seize the opportunity and provide a boost to first time buyers by extending the stamp duty holiday currently in place but due to expire in the New Year. An EDM tabled by Labour MPs Jon Cruddas, Lindsay Hoyle and others yesterday highlights the issue. It argues that we need to continue helping families and individuals to buy property in the current economic climate, and urges the Government to extend the stamp duty holiday in order to continue the stimulation of the housing market, and the economy, in 2010. The current holiday frees buyers of the obligation to pay stamp tax if the property they purchase is under £175,000.

This pressure from the Parliamentary party to extend the current holiday is welcome, as Labour must ensure that it still understands the aspiration of people to own their own homes for the first time, as well as helping people facing problems with their mortgages.

Stamp duty places a burden on first-time buyers, especially when new buyers find it more difficult to gain a foothold on the housing ladder and larger deposits are required by banks. It also takes money away from other parts of the property market, such as renovations and other services, thereby impacting on jobs.

The holiday has the similar, if more limited, effect to the First-Time Home Buyer Tax Credit authorised by President Obama earlier this year in the American Recovery and Reinvestment Act. The Act created an 8,000 dollar tax credit for home-buyers purchasing a first home during 2009.

The credit was designed to jump-start the housing market, and since then it has been credited for boosting flagging sales and saving jobs. In its first 6 months approximately 1.4 million people had taken advantage of the programme, according to the Internal Revenue Service. Economists from the US National Association of Realtors estimate that the current tax credit has contributed approximately 22 billion dollars to the general economy, and approximately 2 million people will take advantage of it by the end of this year.

Recognising the need to further stimulate the US housing market and address associated challenges, the US Congress has extended the First-Time Home Buyer Tax Credit for more first-time home buyers until the end of April 2010.

Lending a helping hand to people who want to get on the housing ladder in these tough times, and stimulating jobs and the economy in the process, is the right thing to do – especially with economists fearing a ‘w’ shaped recession. It would be popular with house-hunters and house-builders and signal Labour’s continued support for first time buyers.

Next week’s PBR should at the very least look to extend the current stamp duty holiday and, more radically, look to a stimulus package for first time buyers.