Housebuilders' share gains not down to government housing package

There was a jump in housebuilders’ share prices yesterday – but most of the gains were bagged before 9am, so ahead of the government’s announcement that the stamp duty threshold was to rise to £175,000.

The two main gainers were:

• Persimmon – up 10% to 424p
• Taylor Wimpey – up 9% to 61p

The Financial Times reports the verdict of banks and mortgage lenders who pointed out that the “£1bn package” might sound generous but it was a drop in the ocean compared with the £4,000bn value of the housing market.

Richard Lambert, director-general of the CBI, summed up the mood of the housing industry with the warning that stamp duty changes would come at a cost and “may turnout to be largely symbolic”.

The FT reported a verdict of “sticking plaster” from both the Federation of Master builders and the National Federation of Builders.

The main details of Gordon Brown’s announcement of a package of measures to boost the housing market:

• Properties worth less than £175,000 will be exempt from stamp duty for one year.
• The previous threshold was £125,000.
• Affordable housing projects – funding from existing budgets brought forward.

“The government is trying to bribe people into buying into a falling market,” said Nick Clegg, Liberal Democrat leader.

It had been hoped that Alistair Darling, chancellor, would have announced the plan in his pre-Budget report but officials in Number 10 beat him to the move.

It is the third time this year that Darling has been forced to make tax changes outside the normal framework of a Budget or pre-Budget statement, the FT noted.

With house prices falling by more than 1% a month, even first-time buyers benefiting from the change will find any gains wiped out within weeks.

Economists are reported to have spent much of yesterday trying to figure out exactly which problem the government’s housing package is supposed to address.

The FT quoted Robert Chote, director of the Institute for Fiscal Studies, as saying: “Luring first-time buyers into a market that has further to fall does not seem particularly sensible either economically or, in the longer term, politically.”