Temporary cut in Stamp Duty would boost housing market
A temporary Stamp Duty cut in this month’s Budget could boost the housing market by encouraging homeowners to move, according to research from Aldermore.
The bank found that over a fifth of recent homebuyers would move again if they didn’t have to pay the tax, while three in 10 prospective first-time buyers would accelerate their plans to buy a home if Stamp Duty was temporarily reduced.
Even longer-term homeowners would look at moving if they could avoid Stamp Duty, with one in six (15%) longer-term home owners admitting they would be incentivised to move property without having to factor in Stamp Duty costs.
Charles McDowell, Aldermore’s commercial director, mortgages, said: “With the property market at risk of coming to a standstill, we would welcome any plans, temporary or otherwise, that reduce Stamp Duty.
“If the Chancellor announced this change in next week’s Budget, it would be a decision that could kickstart market activity. A reduction in Stamp Duty would be particularly beneficial for first-buyers who are struggling with an overly complex and costly system.”
Too much focus on FTBs
It’s no surprise that almost half of wannabe buyers (47%) want an end to Stamp Duty for first-time buyers.
But research published yesterday by the London School of Economics (LSE) highlighted potentially better ways of reforming Stamp Duty by targeting changes at other sectors.
It argued that temporary Stamp Duty holidays simply squeeze demand into a small window and typically force prices up. In other words they create a spike in purchasing followed by a dip.
The LSE report, commissioned by Family Building Society, noted that a cut to first-time buyer Stamp Duty looks likely in next week’s Autumn Budget, but reckoned targeting tax changes at retirees could have a greater effect.
Break for older homeowners
The report suggested that promoting downsizing or moving on to more suitable accommodation by older people is essential to free up the housing market, but that Stamp Duty puts many older people off.
The Aldermore research also found homowners were supportive of such a tax cut. Nearly half (46%) of long-term homeowners believe that scrapping Stamp Duty for those looking to downsize would benefit the UK housing market.
Respondents also pointed out that the supply side of housing needs to be addressed in the Budget, with over two fifths (41%) saying they want to see the Government support the creation of more social housing.
McDowell said: “It is clear from the findings that the nation believes more needs to be done by the Government to improve the housing market.
“However, whilst it would be great for there to be changes in the tax system it can only have a limited impact, the underlying issue remains that more affordable houses need to be built.”