Stamping out the Duty
Following publication of an academic paper, published jointly by the London School of Economics (LSE) and the VATT Institute for Economic Research, an unnamed Cabinet Minister has urged the Chancellor to reform stamp duty on property transactions, which is being blamed for seizing up the housing market. A stamp-duty holiday could allow a temporary amnesty from paying the tax which, the paper states, hampers mobility significantly.
Scrapping the tax would purportedly make many large properties available for those young families in need of the space and, so the theory goes, oil the wheels of the housing market. The report’s author, Professor Christian Hilber noted: “If you are a young family and you have an additional child, you’ll need an additional room, but the stamp duty is discouraging this kind of move because of the additional cost and lack of available homes to move into.” A further benefit would be to allow elderly residents to live independently as they get older, rather than maintain a large, rambling house.
However, given the massive receipts that Stamp Duty brings in for the Treasury, cutting it completely is likely to be out of the question. Equally, house prices may continue their long-term rise, but increased demand as desirable houses come onto the market may cancel out any price drops in the process. Without an increase in the supply of housing products suitable for the elderly to move into, such as apartments with care, a tax cut may do little to recalibrate the market. As such, there is unlikely to be much benefit to the market as a whole. Questions also remains as to whether young families would be able to afford the larger houses coming on to the market and whether the Stamp Duty factor is actually the only thing discouraging older homeowners from moving house – the upheaval, familiarity and memories may hold greater sway.
Nonetheless, the LSE paper estimates the level of home moving would increase by 27% if the levy was abolished outright. If the tax dodge however were aimed specifically at over 60’s for example, this may free up the necessary houses, without significant impact on Treasury revenues, wider house price rises and worsening affordability for the buyer.
The Source, from the experts in Land & Planning. Issue 28