Osborne role in housing market woes is clear from HMRC figures

What's happening in the housing market?

Two indicators today provide clues. The first is from Nationwide Building Society (LSE: NBS.L - news) , the UK's second-largest mortgage lender, whose latest index reveals that, in April, house prices fell for the second month running.

It means during the last 12 months house prices have risen by their weakest amount in nearly four years.

The second indicator may worry the Chancellor Philip Hammond more. The number of homes actually being bought and sold, the process that sparks economic activity as homebuyers splash out on furniture, appliances, gardening equipment and pay solicitors, estate agents and removal and storage firms for their services, is falling.

The figures help to explain why the UK economy grew by just 0.3% during the first three months of the year - down from 0.7% in the final three months of 2016.

The news is revealed in the quarterly stamp duty statistics, published by HM Revenue & Customs, which show that the number of housing transactions attracting stamp duty during January, February and March was 195,000 - down 5% on the same months last year.

Most worryingly, the number of transactions during the period that involved homes worth more than £500,000 - which attract the most stamp duty - was down by a thumping 14% to 22,600.

This was the lowest since the second quarter of 2015 and is worrying for the Government which, in recent years, has grown increasingly dependent on taxes paid by Britain's highest earners.

The statistics suggest long-term changes made to stamp duty by George Osborne, the former chancellor, are hurting activity.

In December 2014, Mr Osborne reformed stamp duty, abolishing the unpopular 'slab' system and replacing it with a system more similar to income tax.

It was a sensible reform that, for most homebuyers, cut the amount of stamp duty they would pay. Unfortunately, in order to protect the amount of revenue brought in by stamp duty, Mr Osborne also jacked up the rate at which the tax is applied - to 10% on transactions between £925,000-£1.5m and to 12% on any part of a transaction above £1.5m.

It meant that, on any purchases above £937,000, the total amount of stamp duty payable would rise. Estate agents, particularly in London, suggest this is now biting.

As Shaun Church, director of the mortgage broker Private Finance, notes: "The statistics make it clear that the upper end of the market has unfairly borne the brunt of land tax reform."

Despite this sharp decline in transactions at the higher end of the housing market, which might normally be expected to hit the sum that HMRC rakes in from stamp duty, receipts from the tax are still rising.

This is due to another of Mr Osborne's changes - his imposition, in April last year, of an extra 3 percentage points to the rate of stamp duty applied when the transaction involves a second or buy-to-let property.

That brought in an extra £454m during the first three months of 2017 - more than enough to cover any shortfall created by fewer expensive properties being bought. It meant the total amount of stamp duty paid during the first three months of 2017 was almost £2.8bn, up 11% on the amount the tax raised during the first three months of 2016, when the extra rate had not been introduced.

The new surcharge on second homes and buy-to-let properties also meant that, during the financial year just ended, the total amount of stamp duty collected by HMRC rose by £1bn to a record £11.7bn.

But it bodes ill for government tax receipts that transactions involving more expensive homes have fallen so sharply.

A healthy housing market needs all parts of it to be functioning smoothly. If buyers of the most expensive homes are not moving as much, due to high levels of stamp duty, that can gum up the market lower down the housing ladder - eventually hurting the first-time buyers the Government is so anxious to help.

And, because the most expensive properties are mainly in London, there is another reason to worry. Any slowdown in London housing activity is usually transmitted, in later months, elsewhere.

Cutting tax rates can often raise the tax take because it stimulates activity. Cutting Corporation Tax has led to a big rise in the amount of Corporation Tax being collected.

Mr Osborne forgot that principle when he whacked buyers of more expensive homes with higher stamp duty rates.