Stamp duty holiday: cost could be less than half the government's figure of £600m

Cold water has been poured on the government’s claim that it was spending £600m to revitalise the moribund private housing market, by offering a one-year stamp duty holiday on properties under £175,000.

Both political opponents and industry bodies argue that the cost will be less than half the figure claimed.

Today’s Financial Times quotes an estimated cost of £250m as being the number that has been put forward by both The Council of Mortgage Lenders and the Royal Institution of Chartered Surveyors.

The paper quotes Grant Shapps, shadow housing minister, as saying: “It is more of a rescue package for a prime minister on his last legs.”

For the scheme to cost the £615m figure quoted by the Treasury, it would need 350,000 deals to be struck on houses in the newly eligible band – namely those with a value of between £125,000 and £175,000.

In the UK, there were a total of 290,000 transactions in the first half of 2008 and experts reckon on a figure of 600,000 private house sales in the full year.

The Treasury’s own estimate is that one in six transactions will be for houses in the newly eligible bracket.

Combining these estimates results in the probability of 100,000 eligible deals.