The Royal Institution of Chartered Surveyors (RICS) says the Chancellor is right to raise the Stamp Duty threshold, but the rise is so small (from £120,000 to £125,000) as to be derisory and represents a squandered opportunity. The RICS is extremely disappointed that the Chancellor has not gone further and raised the threshold to £150 000 as RICS has consistently argued over recent years.
Furthermore, the RICS is dismayed that the Chancellor has once again not seen fit to address the fundamental structure of Stamp Duty, which distorts prices in the housing market by creating pinch points below the threshold for each band. The RICS believes that the tax should be marginal like other taxes, such as income tax. This would remove the distortions in the market.
The Chancellor has announced increased support for first time buyers via shared equity schemes. However, the support is small and will help less than 1 per cent of all first time buyers.
On Real Estate Investment Trusts (REITs) the news is better. RICS welcomes the news in today's budget that REITs will be introduced from January 2007. These investment vehicles should help the Government achieve their aim of improving the efficiency of both the commercial and residential property investment markets and open them to individual investors.
The Government has listened to industry concerns regarding restrictions on gearing, effectively doubling the borrowing thresholds. Also, basing the conversion charge at 2 per cent of total gross asset values will mean a lower tax charge than a model based upon capital gains. These welcome amendments should facilitate an easier transition to REIT status for many listed property companies. RICS believes that REITs will help facilitate the development of a high quality residential lettings market.
RICS chief economist, Milan Khatri, said: 'Its a mixed budget for property, offering little to first time buyers and very little on the affordability of homes. This budget misses another opportunity to address the problems of stamp duty and provide a fairer and more appropriate system that would truly assist first-time buyers. However, the introduction of REITs does offer the prospect of boosting house building over the medium and long term and we are pleased that the Government has listened to the industry's concerns.'
