"First time buyers struggle to get on the ladder, young families want to move up it and the elderly want to downsize, but all are stifled by Stamp Duty."
Stamp Duty Land Tax is having a "significant effect" on the UK property market by impacting people who move more, according to research from the Centre for Economics and Business Research and Santander Mortgages.
Its findings reveal that over the course of a five-year period, an additional 146,000 property transactions would have taken place if Stamp Duty had been removed.
It also argues that the incentive to build more property would have been higher as under Stamp Duty the seller bears some of the tax burden by selling at a lower price. This lessens profits and reduces the incentive to develop supply in cases where profitability is more marginal, fuelling the lack of housing in the UK.
Aldermore research also found that over a fifth (22%) of recent home buyers would consider moving home if stamp duty was cut for a temporary period, even if they had not been planning to do so beforehand.
In addition to this, almost one in six (15%) longer-term home owners (bought over four years ago) would be incentivised to move property if this proposal was implemented. A temporary stamp duty cut is also supported by prospective first time buyers, as three in 10 (30%) would consider accelerating their plans to climb the first rung of the ladder if the Chancellor announced this measure in his Budget.
Nearly half (46%) of long term homeowners believe that scrapping stamp duty for those looking to downsize would benefit the UK housing market.
When asked what other measures should be put in place in the upcoming Budget to improve the housing market in the UK, over two fifths (41%) of the UK want to see more social housing built, and nearly four in 10 (39%) believe a stamp duty freeze for first time buyers would help the market.
For prospective first time buyers, over half (51%) want to see the Chancellor announce an extension of the Help to Buy scheme which is set to end in 2020. This is closely followed by ending stamp duty for first time buyers (47%), and over two fifths (44%) want the Government to relax current regulations to make it easier to get a mortgage.
Miguel Sard, Managing Director of Mortgages at Santander UK, said: “The report highlights the unintended consequences of Stamp Duty. First time buyers struggle to get on the ladder, young families want to move up it and the elderly want to downsize, but all are stifled by Stamp Duty.
“Those aged between 65 and 74 have the greatest average property wealth in this country, and youths have the least. The housing market needs to allow for adjustments in demographics to be mirrored by the supply of accommodation.”
Christian Jaccarini, Economist at the Centre for Economics and Business Research, commented: “While the under-supply of housing has rightly received much attention, our research shows that Stamp Duty significantly impedes housing transactions, meaning that we don’t maximise the benefit from the existing housing stock. In fact, we estimate that 146,000 more transactions would have taken place in the 5 years to June 2017 if Stamp Duty was removed entirely. The Chancellor should seize this opportunity and make Stamp Duty reform a priority at the upcoming Autumn Budget.”
Charles McDowell, Aldermore’s Commercial Director, Mortgages, added: “With the property market at risk of coming to a standstill, we would welcome any plans, temporary or otherwise, that reduce stamp duty. Our findings show that over a fifth (22%) of recent buyers and almost one in six (15%) long term homeowners would consider moving home if the Chancellor announced this change in next week’s Budget, and 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.
“It is clear from the findings that the nation believes more needs to be done by the Government to improve the housing market. There are a number of measures the Government can implement to improve the current situation, and we want to see housing at the top of its agenda in next week’s Budget. 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 affordably houses need to be built.”