I’ve thought for a long time that Stamp Duty is stifling the market, particularly at the top end and for investors. The additional 3% for secondary properties removes a tranche of buyers from the market and, while this may make more properties available to first-time buyers, it could ultimately be to their detriment. The private rental sector is a significant element of our housing stock and if supply of property is discouraged from entering the sector through taxation, the balance of supply and demand will shift, and rents will increase. In fact, we have recently seen headlines confirming that rents have hit their highest ever level. For potential first-time buyers saving for a deposit, higher rental prices could actually do more harm to their chances of getting on the ladder than any benefit to the supply for FTB-friendly properties.
If we are looking for a change that genuinely stimulates the market and the economy, I would propose scrapping Stamp Duty Land Tax all together. This will remove a significant barrier to buying property. It will enable first-time buyers to put down larger deposits, as they don’t have to set aside cash for tax and it would encourage investment in housing stock, which will be beneficial to society. I also believe that if this measure were to succeed in stimulating the market, it could also be implemented with no net loss to revenue takings. After all, there is so much money that is generated by the homebuying process. Think about the VAT alone on the cost of removal companies, estate agents, solicitors, furniture and decorators. If the homebuying industry is given a boost it will also mean businesses generating more profit, so paying more corporation tax and creating jobs, which will also contribute to tax revenue.
And here’s a radical thought – if Stamp Duty is to be charged, how about ringfencing the takings and putting this back into housing. If you were to take all of the Stamp Duty receipts for two years, and use government land, you could create housing for every homeless person in the UK.