Housing Watch: A quick housing fix? Shake up stamp duty

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Stamp duty could be easily and quickly adapted to create a more helpful environment, particularly for first- and last-timers

Housing has moved up the political agenda in recent months with a raft of measures designed to both meet the ever-growing demand for property and quell prices that have been rising well above wage inflation.

However, these are not the only problems facing buyers. For many, the frictional costs associated with buying a home can be a barrier in their own right.

Multiple costs
Whether it is conveyancing fees, moving costs or ground rent on leasehold properties, the costs of buying can mount very quickly. In fact, recent statistics from Lloyds Banking Group put the average cost of moving home at £11,000, which is a significant hurdle.

Stamp duty often forms the largest part of the total cost. Thresholds have sat idle as house prices increased – by nearly 7 per cent in the past year alone, according to the ONS. With the average cost of a home now £218,000, the basic tax threshold of £125,000 is badly outdated.

The rising price of property means many buyers face paying higher rates, and the effects are clear. Property transactions have remained stagnant since 2014 and loans to homemovers over the past year are down by more than 6 per cent. Stamp duty has had a major impact on landlords, with last April’s rise acting as a significant deterrent and leaving buy-to-let lending in November, for example, down by a third on the previous year, HMRC figures show.

And all the while would-be purchasers struggle to overcome barriers, there is a knock-on effect for professionals in the housing industry. It means less conveyancing work, fewer surveys and fewer clients in need of advice.

But it does not have to be like that. Stamp duty could be easily adapted to create a more helpful environment for buyers, particularly first- and last-timers.

To get our housing market moving, an overhaul is clearly needed.

A regular review of stamp duty’s impact on the lower end of the market could help the nation’s hard-pressed first-time buyers, enabling the Government to amend thresholds where needed.

Saving for a deposit is already hard enough for young people yet these buyers would then have to pay an extra £1,860 in stamp duty on the average UK home, amid other costs. For those in the capital the situation is even worse: on an average house price of £482,000, buyers face an astounding £14,100 in tax.

Lifting the threshold for first-timers, as Labour did for properties under £250,000 in 2010, would remove a significant financial barrier for many younger people.

Older homeowners
The Government could also use stamp duty holidays or reductions to encourage older homeowners to downsize. These costs have kept many elderly homeowners trapped in large family properties unsuitable for their needs, and the consequences for the housing market have been damaging.

Younger families have faced a limited supply of such properties to move into, which has in turn squeezed the availability of smaller, more affordable housing for first-timers. Removing or reducing stamp duty for last-time buyers has the potential to free up the equivalent of 2.6 million family homes.

Ultimately, there must be recognition of the impact of rising house prices on stamp duty. Building more homes is essential but is a long-term measure. For now, it is important we do not lose sight of the more simple, immediate steps that could be taken to remove other financial barriers to those trying to make their way in the housing market.

Christian Ulbrich, head of UK real estate investment firm Jones Lang LaSalle, hit the nail on the head recently, saying: “Stamp duty doesn’t help to build one single apartment; it just makes it more expensive.”

Stephen Smith is director of Legal & General Housing Partnerships