måndag 17 mars 2008

Bricks and mortar

At the other end of the newspaper spectrum, though also from the Murdoch press, is the Times. This too was unenlightening. Its property section has the title "Bricks and Mortar", which is misleading as the most important thing about it is the land purchase and sale opportunities. "Little in the Budget to help the majority of would-be homeowners" ran the headline, critical of the Chancellor's decision to leave Stamp Duty much as it was.

Now Stamp Duty is a very bad tax, but not for the reasons that are usually given. It is a tax on moving and therefore discourages people from moving. This gums up the market and encourages people to stay in accommodation long after it has ceased to be suitable for them. Which in turn creates a shortage, depriving those at a different stage of life, for whom that accommodation is exactly what is needed.

But whilst abolishing Stamp Duty would be of indirect benefit to everyone by freeing-up the market in general, it would not help first time buyers by making places cheaper to buy. Without the tax, purchasers in general would have more money available to spend on properties and prices would simply rise; it is sellers who bear the burden of the tax. It is worrying that even property journalists cannot see this and that consequently the public remains ill-informed on the subject.

The land element of real estate should indeed be taxed but not as a charge on selling prices when people move or die. It should be a regular tax levied as a replacement for other taxes.

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