Following the Budget last March that introduced significant changes to savings and pensions, the final Autumn Statement before the General Election next year saw the Chancellor George Osborne overhaul the stamp duty system. The changes come into effect immediately and will, it is claimed, improve things for 98% of house buyers.
The current system works on a slab basis, with the rate rising at various trigger points. Stamp duty was 1% for homes bought for more than £125,000, 3% for properties bought for more than £250,000, then rising to 4% at over £500,000, 5% at over £1m, and 7% at over £2m. This meant that when a house was bought for £250,000, £2,500 was payable. However, if a house was bought for £250,001, the stamp duty increased threefold to £7,500.03.
Under the new system, rates will apply only to the part of the property price that falls within each band when it is bought. This means no stamp duty will be paid on the first £125,000, 2% will be paid on the portion up to £250,000, 5% on the portion up to £925,000, 10% on the portion up to £1.5m and 12% on any amount above that.
Whilst these are obviously just forecasts, if you look at the detail of what is happening, there is no reason to be too pessimistic. In the Eurozone, for example, the current growth weakness is based on the main economies of France, Germany and Italy, rather than the more peripheral PIGS – Portugal, Ireland, Greece, Spain - so there is much less threat of a break-up of the eurozone.
With Japan, its slip into recession was mainly caused by a big drop in business inventories (stocks) and most forecasters are predicting a rebound in Japanese GDP next year. Both prime minister Abe and the Bank of Japan are also committed to doing whatever it takes to stimulate the economy, so the outlook for Japan remains more or less on track with Abe’s ‘three arrows’ strategy
As for China, there are strains in the economy but nothing to suggest a collapse. The reality is that we should all get used to China growing at 7% not at 10%, which is inevitable in the long run and probably intentional.
The US economy is expected to be strong over the next couple of years, with the OECD predicting growth rates of 3.1% and 3% respectively. It further predicts that the Eurozone will pick up a bit and that China will grow at nearly 7%, with India not far behind and Brazil also doing better. The IMF, in its World Economic Outlook 2014 report, also points out that the US and UK are doing pretty well amongst the advanced economies. However, it does go on to describe global economic growth as 'mediocre', pointing out that the legacy of the financial crisis has taken longer to deal with than expected.
So whilst the global economy is imperfect and the recovery uneven, there is nothing to suggest a second financial crisis is on the way. Indeed, the fall in oil prices works like a tax cut to most western economies, and so will help boost growth as well as making it easier for central banks to maintain cheap money.
The upshot of all this is that the first UK interest rate rise is likely to be a long way off still, possibly even into 2016. It also means that there are opportunities for brave investors as negative economic sentiment can depress equity prices below their true value.