If you want to win the heart of the average British voter, it helps if house prices are going up. It’s the one measure of economic prosperity that almost every homeowner genuinely cares about or understands.
Politicians realise this only too well – for example, the best line of attack the Tories could come up with in the recent Rochester by-election was to warn that a win for Ukip would hit house prices in the region. The Tories still didn’t win – but it might conceivably have reduced the Ukip majority.
In the old days, juicing prices ahead of an important vote used to be easy – the chancellor had control of interest rates and so could give them a little tweak before the election rolled around and hopefully get a boost from falling mortgage rates and rising prices.
Nowadays, of course, the central bank has its nominally independent hand on the tiller. And in any case, interest rates have been at near-zero levels for years.
So it’s trickier – you have to get a bit more creative. But Chancellor George Osborne looks like he managed to pull it off in his latest Autumn Statement. The headline-grabber was the change in the way stamp duty is levied.
Before now, stamp duty was a ‘slab’ system. If you paid £249,999 for a house, you’d pay 1% – £2,499.99 in stamp duty. But if you paid £250,001, you’d pay 3% of that – just over £7,500.
Now it’s more like income tax. You won’t pay anything on the first £125,000, then 2% on the portion up to £250,000, and so on, up to 12% on prices over £1.5m. Apparently, around 98% of buyers will pay less than under the old system, saving an average of around £4,500.
The only people who will pay more are the sorts of buyers who’ll be fretting about the introduction of Labour’s proposed ‘mansion tax’. On top of that, this move dispenses with a widely-hated tax that people have wanted politicians to reform for years.
So far, so good. But what’s really smart about it is that the average house buyer won’t really save anything like £4,500. Under the old system, no one in their right mind would ever pay £255,000 for a house, given that the stamp duty differential was so substantial – that £250,000 barrier was a massive sticking point for prices.
However, under the new system, buyers will be a lot more willing to offer just that couple of thousand more for a £249,999 house they really want, particularly in any sort of competitive market. So the chances are, any tax savings will be split between buyers and sellers – and knowing the UK property market, it’s the sellers who will get the lions’ share.
So Osborne’s done nothing to make houses more affordable. But he has pushed through a policy that promises to tax wealthy (quite possibly foreign) house buyers more heavily than the rest, and that also gives house prices (outside London at least) that little leg up for the feel-good factor. What politician on the make could ask for more?