New bumper stamp duty receipts predicted by the Government’s official forecaster have been dismissed as ‘ludicrous’ by property experts.
It has sparked claims that the Office for Budget Responsibility (OBR), which is supposed to be independent of the Government, is producing flattering numbers to help Rachel Reeves’ handling of the state’s finances look better than is really the case.
In its economic and fiscal outlook published last week alongside the Chancellor’s Spring Statement, the OBR said stamp duty receipts were expected to raise £17 billion in the current tax year.
But it also predicted this haul would soar to £28 billion by 2031 – a figure swiftly dismissed as wildly optimistic by housing experts. One told The Mail on Sunday: ‘This is ludicrous. I know the OBR has a certain obligation to go along with Government policies, but this is really far-fetched to say the least.’
The projected increase – which would allow Reeves to depict the economy as poised for a boom at a General Election in 2029 – will be produced by rising house prices and a bounce in home sales, according to OBR projections.
But this is seen as overly hopeful due to sluggish conditions in the property market, with steep stamp duty bills deterring house moves.
Stuccoed and stuck: Even sales in upmarket London neighbourhoods such as Chelsea have dried up
At the same time, the market is grappling with a slowdown in housebuilding that risks pushing up prices further and crushing demand. Last week the UK’s second-largest housebuilder Vistry reported a 9 per cent drop in completions of new homes.
Mortgages could also become more expensive if the conflict in the Middle East pushes up inflation, forcing the Bank of England to raise interest rates.
The OBR itself conceded that just 220,000 homes will be delivered in 2026-27, less than the annual average of 260,000 earlier this decade and well below the annual target of 300,000 that was one of Labour’s key election pledges. The OBR said the 300,000 target would be achieved by 2030 thanks to the Government’s reforms to the planning system.
But experts remained sceptical with Richard Donnell at property search site Zoopla saying 1.3 million home sales would be needed to produce the OBR’s £28 billion stamp duty windfall by 2030.
‘Stamp duty is a deterrent to moving,’ he said. In the South, hard-pressed buyers are paying an extra 2.5 to 3 per cent of the value of a property in this tax. The 5 per cent rate of stamp duty charged on the portion of the value of a home between £250,001 and £925,000 hits particularly hard.’
While central London should be a bountiful source of stamp duty, Jo Eccles of buying agent Eccord noted far fewer ‘trade-up’ buyers seeking a larger property than usual, further limiting funding for the Exchequer. She said: ‘They can’t justify the significant transaction cost in return for an often marginal lifestyle difference.’