This equates to £21.5 million of extra revenue from Wales for the Exchequer - none of which is ring-fenced to come back to Wales. This was one of the key messages from Clive Wood, Chairman of the Council of Mortgage Lenders, addressing the CML Cymru annual lunch in Cardiff today.
The CML believes that the Government should move the existing "slab" system of stamp duty - under which the highest applicable rate of duty is charged on the entire value of the property - to a "graduated" structure, where the higher rates would apply only to the relevant portions of the property's value. At present, on a £250,000 house the rate of duty charged is 3% on the entire £250,000, working out at £7,500 - whereas on a £249,000 house the rate charged is only 1%, working out at £2,490. So there is more than £5,000 extra tax on a property whose value is only £1,000 greater. This clearly creates distortions that hinder the market.
Mr Wood also looked at current housing market conditions and the outlook for the future. With average house prices in Wales recently having topped £100,000 for the first time, the Welsh market has experienced some marked property "hot spots", especially in Cardiff. In the wake of last week's rise in interest rates, the big question is when, and by how much, the market will begin to cool. "On balance," said Mr Wood, "we do not believe there will be a sharp correction ... we are not out of the woods yet though. Borrowers should tread cautiously, as it is far from clear whether there will be a concerted hike in interest rates over the coming months."
In a wide-ranging speech, Mr Wood scrutinised latest Government thinking on the housing market (including its two reviews of housing supply and long-term fixed-rate mortgages), and looked ahead to mortgage regulation from October 2004, and the ongoing discussions about credit regulation at a European level.
Mr Wood reminded guests at the lunch of the importance that housing and financial services have in Wales: "Construction and finance employment accounts for approximately 10% of all Welsh employment and 9% of Welsh GDP ... Increases in housing-related activity can bring positive economic benefits to Wales. We believe this is a role that should be developed and exploited."
