When the Chancellor Philip Hammond scrapped stamp duty for first time buyers of homes costing less than £300,000, the Government made much of the potential of this move to breathe life into the sluggish housing market. It has become apparent, however, that the market must be able to move at both ends or it remains constricted.
Owners of larger homes may want to downsize, but the punitive nature of stamp duty is limiting their options. Their pool of potential buyers is much reduced as many are being put off by the charge. In addition, for them, paying further tax on any new home is a worry if they are no longer earning.
Sam Dumitru of the Adam Smith Institute describes stamp duty as a “voluntary tax” – ie you can choose not to pay it if you stay put. This is the choice that many seem to be making. In some cases, whilst individuals may be able to pay the duty, they see it as so unjustly punitive that they choose to remain in a property which no longer suits their needs. But has the greedy Treasury shot itself in the foot? Stamp Duty receipts are down 7.9% so far this year and, if this trend continues, the loss of duty over the full year will reach £1.1 billion.
Levy on Second Homes
Stamp duty has applied an additional brake to the housing market due to the uplift levied against those buying second homes. An extra 3% is payable if you already own a property (or a share of one) and choose to buy another – whether for investment or as a holiday home. The overall effect has been to reduce stock and activity generally.
The Daily Mail reported last Saturday that a possible solution to the market paralysis would be to incentivise so called “last movers”, usually more mature homeowners looking to downsize. It is certainly our experience in talking to homeowners that many potential downsizers are delaying a move at present. The resulting stasis at the top of market filters down to the bottom as less properties become available. Plainly, this benefits neither vendors nor purchasers: the housing market remains static and therefore the economy suffers. The ONS reports that in some parts of the UK property sales are down by 50%. Will the resulting reduction in revenue force the Government to see sense, amend stamp duty and let the housing market move more freely?
About the author
Emma started her working life at English Heritage’s London HQ, then went to work at a large City law firm where she gained her law degree, she then worked in a number of legal jobs including at a branding consultancy where she specialised in intellec…
View Full Profile