There are growing demands across the country to slash stamp duty charges in order to free up the stagnant housing market. New prime minister, Boris Johnson, and chancellor, Sajid Javid, have been urged by their colleagues to ‘throw the kitchen sink’ at stamp duty.
An emergency Budget has been mooted for early October and could result in action on the reforms. A group of housing experts and campaigners has demanded that amendments are passed as soon as possible as it is ‘beyond doubt’ that this is what is currently holding people back from moving home.
Some property experts have said that wholesale reforms of the property tax are greatly needed to keep the ‘home ownership dream’ alive.
Stamp duty threshold raised
The prime minister has already proposed to raise the threshold for the payment of stamp duty from £125,000 to a much higher level of £500,000. During his opening speech at the Conservative party conference, he said: “It is a disgraceful fact that we now have lower rates of owner occupation for the under-40s than some other European countries, such as France and Germany. This reflects the failure of governments for the last thirty years to build enough housing. But it is also a massive opportunity for us Tories.”
Mr Johnson talked of uniting the country, having safer streets, improving education and creating a better road and rail infrastructure. He added that he wanted to give “millions of young people the chance to own their own home”.
Help to Buy under threat
If the property market shows cracks after a no-deal Brexit and the predicted 10% fall happens then the goverment may have to pull the plug on the Help-to-Buy scheme which will risk alienating the younger market.
Mr Johnson has said he wholeheartedly did not want to cancel the scheme, despite a report from the National Audit Office that concluded that nearly two thirds of home buyers using Help-to-Buy did not need to use it.
The report confirmed that the scheme had helped to increase home ownership and housing supply but found that one in 25 had household incomes in excess of £100,000 and that the scheme helped boost the profits of housing developers. Indeed, half of the homes built in England by Persimmon, Barratt, Taylor Wimpey, Redrow and Bellway were sold using Help-to-Buy, providing them with record profits.
Changes that won’t benefit property downsizers
One change that has been mooted is a move to make home sellers pay stamp duty rather than home buyers. While this move would appear benefit all buyers, it would negatively impact home owners wanting to downsize. Buyers moving up the property ladder would benefit as they would pay stamp duty on the cheaper property they are selling rather than the usually more expensive home they are buying. The government has this week said this particular change will not be implemented.
Records show that older people are increasingly staying put in homes that are more suited to families. The current threshold of stamp duty on property makes house-buying more expensive, so that simply cutting the levy would make it more attractive for older home owners to downsize, which would in turn release larger homes for younger buyers and families.
The current status means that many young families face heavy competition for the small number of homes on the market, which consequently pushes up house prices. No surprise then that ten years after the financial crisis a million more adults still live with their parents!
Nationwide’s figures show that 54% of privately owned homes are under-occupied, up from 42% in 2000. This means that they may have two or more spare bedrooms, which is a huge difference compared to just 15% of under-occupancy in the private rental market.
Two out of three homeowners aged over retirement age have two or more spare bedrooms but, at the same time first-time buyers are taking longer to save for a deposit, there are no incentives for older homeowners to release their property and downsize, such as the stamp duty incentives for first-time buyers. Homeowners hoping to downsize to a smaller property currently pay the full cost of stamp duty, which can add thousands to the cost of a move.
Editor’s Comment: Should there be an over-70’s downsizing dispensation if they are moving to a cheaper house and it’s their only property?
Top rate stamp duty changes
Another consideration is whether to reverse the 2014 stamp duty change that took the top level of duty that affects homes valued at over £1.5 million to 12% to the previous level of 7%.
TaxPayer’s Alliance spokesman, Scott Simmonds, says that many people are ‘over the moon’ to hear the prime minister talk of raising the stamp duty threshold and lowering the top rate. He said: “There is a housing crisis in this country with many people unable to afford to purchase their own home. People who would like to downsize are stuck in large houses while young families remain in houses that are too small.”