Brokers have voiced support for stamp duty cuts that politician Boris Johnson is reportedly considering if he wins the Conservative Party leadership race to become prime minister.
Johnson is also expected scrap stamp duty on homes up to £500,000 and cut the charge on properties over £1.5m from 12 per cent to 7 per cent. However, there has been no word on whether he would also abolish the 3 per cent stamp duty surcharge on homeowners buying additional properties.
Analysis by Savills suggests that based on 2018/19 transactions, Johnson’s plans would free 300,000 buyers a year from paying the tax. News of his policy prompted housebuilders’ shares to surge last week, although chancellor Philip Hammond warned there would be no free cash for Johnson’s tax giveaways if the UK leaves the EU with no deal.
Altura Mortgage Finance director Rob Gill says: “The proposals are certainly eye-catching and would no doubt be popular with buyers at both ends of the market. They would surely boost the upper end above £1.5m, where buyers have been put off by six-figure tax bills following the increases by George Osborne.”
Gill would not be surprised if Johnson were to cut the surcharge on additional homes or relax the buy-to-let clampdown as well.
He says: “Stamp duty is a transaction tax, so significant cuts would boost sales volumes, leading to a healthier market for buyers, sellers, housebuilders and other property professionals. On that basis, it could benefit not just the housing market but also the economy as a whole.
“There is a danger, however, in telegraphing such cuts. If buyers believe their stamp duty burden might come down substantially in just a few months’ time, they have every incentive to delay their search and even pull out of ongoing transactions.
“With the summer slowdown ahead and Brexit uncertainty looming immediately afterwards, politicians giving buyers further excuse to delay is the last thing the market needs.”
London Money mortgage and protection consultant Catherine Beaumont says the move will particularly benefit house hunters in the capital, as many first-time buyers are still caught by the tax because they cannot find suitable homes under the £300,000 threshold for exemption.
She was recently advising a first-time buyer couple in Brixton that was buying a two-bedroom flat for £420,000. The proposals would therefore shave £6,000 off their moving costs.
Beaumont says: “It would be a welcome change, but it is a London-focused policy and is unlikely to help many home buyers in other parts of the country.”
Anderson Harris director Jonathan Harris says: “Historically, tinkering with stamp duty at the lower end – removing it for first-time buyers, for example – has made a big difference in encouraging people to move, so reducing it considerably at the top end, or removing the surcharge for buy-to-let investors, could also help stimulate the market and certainly give it a short-term boost at least.
“Crucially, changes may also persuade downsizers, who currently cannot sell large family homes because of the high level of stamp duty, to move into something smaller.”
North London estate agent Jeremy Leaf also believes scrapping stamp duty on homes up to £500,000 could help stimulate the market.
He says: “First-time buyers are particularly important to the health of the overall market because they buy at the bottom and trade up, driving higher volumes of transactions, which boosts the economy as a whole through job creation.
“But care needs to be taken to ensure that stamp duty changes do not have an inflationary effect on house prices, perhaps by limiting the higher threshold to first-time buyers or to London and the Southeast.”
Leaf says that, in order to keep house prices and rents in check, the government must continue to look at other affordable housing initiatives.
He thinks it may be difficult for Johnson to get support for the stamp duty cut on homes over £1.5m because it will be seen as a move to help the super-rich, but he argues that it is also important to have movement at the top of the value chain for the rest of the market to function properly.
He adds: “If downsizers cannot move because no-one wants to pay the stamp duty on their million-plus homes, that has a knock-on effect all the way down the scale, including on first-time buyers and second steppers.”
“But politicians will also need to keep in mind the needs of the growing tenant population if they want to win votes, as there is an increasing number of over-50s who are still renting.
“We have seen some attempts to do this with the ban on tenant fees and no-fault evictions, but it will be ever-more important to keep renters happy in the years to come.
“But we also need to ensure that property investors are not driven out, reducing the supply of homes and causing upward pressure on rents.”