RICS Responds to Budget Announcement

RICS' initial reaction to the last Budget before the election is set out below; a fuller analysis will be available later today - check back to view this. If you are a RICS Connect subscriber, you should receive this automatically (email NBellanger@rics.org to join our mailing list).

Significantly, the Chancellor has listened to RICS' calls to reform the stamp duty system by creating a higher rate and raising the lower end of the threshold, which we believe will benefit first time buyers and stimulate housebuilding. In the Budget document, RICS data is quoted on page 166 [extract below]:

'Survey data from the Royal Institution of Chartered Surveyors suggests that while stocks of properties for sale remain low compared with historical averages, demand from new buyers has picked up leading to house price increases in 2009 despite property transactions being around half the level in 2007.'

Commenting, RICS Chief Economist Simon Rubinsohn said:

'Measures to help boost the housing market are welcome and moves to reshape stamp duty by shifting the burden from first time buyers at the lower end of the market towards those buying more expensive properties are a positive step. RICS has called on the Chancellor to make this change and a recent survey of RICS members suggested that the number of transactions would increase even if a cut in stamp duty at the lower end of the house price range was offset an increase on more expensive properties. Specifically, 56% of surveyors questioned felt this reshaping of stamp duty would lead to increased transaction activity.

'This change to stamp duty could help transactions rise above 1 million for the first time since 2007, although this is still well below the 1.7 million transactions that were taking place at the height of the market. Although stamp duty should have an impact on the market any improvement will be limited by the ongoing lack of housing supply and restricted mortgage lending.

'RICS believes that greater reform of stamp duty is still needed. The current slab structure, where a higher rate applies to the whole value of a transaction, should be replaced with a marginal system similar to income tax. This would smooth out distortions in the market and can be done on a revenue neutral basis. There also needs to be consideration of bulk purchases of property by institutional investors who are likely to be discouraged by a higher rate on properties over £1 million. Changes should be made so stamp duty for these purchases is calculated on the average cost per unit not the total cost of the transaction.'