Should stamp duty be abolished to help the housing market?

[Dorothyperky]

Nothing is selling in our area over £500k (south).

Every agent near us is seeing less sales and fewer instructions.

Also would it make a difference to you?

Or perhaps the owners before they died had tried to sell it but refused to reduce the price to the necessary amount for it to sell.

There was a house on our road that held out from 2007 to 2019 and then just missed the surge
They must be kicking themselves after all that time

If the "Ten Year Yield" stays consistently at or above 5% it will be then, the difference with recent spikes is that Trump, Truss etc. could just U-Turn on domestic policy, to get it back down, now they need to invade Iran to get it under control, not a good time to be carrying large mortgage debt.

If they invade Iran Mortgage rates over the least of everybody’s worries
They got their arse kicked in Afghanistan
They got their arse kicked in Iraq
Going for the Hattrick it would appear

I do think that at the moment, it is seriously affecting the market for flats - it feels like you can't "climb the ladder" any more because you might get stuck on any ring at any time and have to put your life on hold. But SD also makes each step so expensive... But it does make sense to have twenty-somethings living in flats at a time of their lives when that makes sense - so they need to find a way to make them more appealing again.

There are so many reasons to buy a house rather than a flat, I don’t even know where to begin

Yes, but there are also other problems with flats, such as difficulty if achieving the energy performance rating as you often have no say over things like heating, i.e. many flats don't have gas installed and the landlord/lease won't agree gas being installed, likewise necessity to change electric heating and water boiling is sometimes refused by the landlord or not allowed by the lease, likewise loft insulation, double glaze windows etc. I'm on a couple of landlord forums and a lot are trying to sell up as they don't think they'll get the EPC rating required meaning they won't be able to let to new tenants if the proposed lower bandings come into force. Then of course, lots are still blighted by cladding after Grenfell which renders them unsellable until the work is done which is often unaffordable by the leaseholders. We've also got a 10 story block in our town which are unmortgageable due to structural issues, one being that they contain asbestos, which is so expensive to repair/replace, it's never going to happen, so the only people who can buy are cash buyers not needing a mortgage, which has massively knocked down selling prices and lots of the residents who own their own leasehold flat are trapped them in perpetuity as they can't afford to move.

I bet.

I grew up in a popular NE town. Theres a ton of new builds there, average price around 350-400k. This would get you a bog standard 3 bedroom house with a very small garden.

Average local wage is about 25-30k. Pricing these very average houses at 10-15x the local wage is ridiculous. So they just sit there for months (and in some cases, years), and gradually reduce the price until someone bites.

Abolishing stamp duty wouldn't do much to get these sold. Simply put, prices either need to drop substantially, or wages need to rise. The disconnect is still far too great. I bet it's even worse in the SE.

To the contrary, if the SDLT was replaced by an annual house value tax payable by owners including the kite-flying developers then it would have an immediate effect.

I rented somewhere like this. The owners inherited it. We paid £350 a month for electricity (this was 2012ish). It never got above 10 in the winter and we all had to sleep in one room as it was so cold.

id imagine with all the price rises you’d be looking nearer a grand a month now.

although i appreciate it would go straight to a developer / family who wouldn’t live in it whilst the work is being done.

fastforward to a few years ago we looked at buying one in that condition it was up for £450,000 I viewed it after it had been on the market for a while and offered £375,000 because the heating.
they didn’t even put it forward

fast forward 9 months it had been reduced to £375,000 and still sat there

I’ve read about a third of the thread so sorry of this has been mentioned but what about the £14billion stamp duty gets the government every year? And for first time buyers it’s saving up for the deposit that’s the biggest barrier.
An annual tax is not good - if I bought my house for £100k 15 years ago and it’s worth £500k now and what if my pay didn’t go up? Or I retired?
I bought my three bed terrace in zone 3 London five years ago paying £35k in stamp duty. If there was a 1% property tax I would be paying about £10k annually - so I would have paid £50k to now and be paying ever more for the rest of my life? I earn £40k before tax…I could afford the house because of inheriting money (I’m a widow) and I’ve been buying and selling since the 1980s. I can’t afford £10k/year.
A stamp duty break or ‘holiday’ will get the market moving but also inflates prices. And if people know they don’t have to pay stamp duty they add that money to their buying budget.
Proposals have considered a break for retirees that are downsizing, having seller pay it (but they’ll just increase the selling price), income caped deferrals… there’s not an easy solution otherwise they’d have tried it!
Also the current stagnation of the market is due to how difficult it is to save enough for a deposit and fees, global forces, available housing stock and interest rates. Tweaking one aspect will not resolve the overall issue.

You raise some good points.

Firstly, Annual Home Taxes are pretty common around the world, so we're mainly talking about changing the current mind-set. It's not radical.

Secondly, the government would set all the rates and allowances. So if the rate was tiny then you're already making a mountain out of a mole-hill, but if it's not then you're not. None of us know.

I would expect the amounts recovered by any new taxes to be comparable, in total, to any taxes replaced, so we don't need to worry about the £14B current SDLT.

I could conceive of mitigation schemes for aged pensioners to prevent them being forced from their homes. The obvious one would be to add the annual taxes as a charge against the property, so they could be recovered on death with interest.

The overall effect would be to reduce the use of property as some kind of piggy bank / pension / investment scheme, and make it generally more affordable for it's proper use as a home to live in.

@mondaytosunday

I’ve read about a third of the thread so sorry of this has been mentioned but what about the £14billion stamp duty gets the government every year?

It just gets lost in the leaky bucket of public spending.

The country pays 100 BILLION in interest on national debt each year, so the stamp duty barely even makes a dent in the interest bill.

National debt is 3 TRILLION and annual total public spending is a whopping £1.3 TRILLION.

So the stamp duty of £14 billion barely touches the sides.

Some kind of piggy bank??

You mean saving for care in your old age so you don't have to have your hand out to the state ?

Yep. As soon as housing stops being used as a cash cow, prices will moderate and become more affordable, and people will have greater disposable income ..... to properly save for old-age care (and pensions, etc).

And what about people that have already struggled up the housing ladder by going without all the ubiquitous holidays, days out and all the other luxuries which seem to have morphed into basic human rights these days? - you just want to double and treble tax them into oblivion

Yes, and more-so, since the house gains were unearned, unlike people who have struggled, forgone holidays, days out and had to rent ....... because they were unable to afford homes or, by chance, lived in a less economically desirable area.

But mortgages were paid from taxed income as were any home improvements also funded through taxed income which also benefits the workforce that provided those services....you know...the economy. ISA increases are also unearned income - have you got a problem with those too

Rent is paid from taxed income. Where is the renter's gain?

Gains from ISA's (Stocks and Shares) are different because you will have invested in productive assets - like companies - and share in the profits from those assets. And an ISA is a deliberate tax advantaged structure to encourage investment.

Exactly this. There are far more advantages to having affordable home prices as opposed to the opposite.
Those who have 'struggled to get up the property ladder' have no particular right to try to take the moral highground compared to others. Many people don't have frequent holidays and other luxuries, including most of those who are forced to rent because they cannot afford any sort of home.
If homes were not treated as investments and were taxed appropriately, prices would gradually fall and hoarding of homes would markedly reduce.

Rather than pissing away billions and billions on unnecessary government spending (HS2!) that money could have been spent on a programme of mixed tenure government house building. The social housing waiting list could have been massively reduced and shared ownership/first time buyer/ reduced rate homes could have been built for those who want to own. What helps people more? A safe, affordable home, or cutting 15 minutes of a train journey into London???

I always have to comment when people suggest a property tax for those who already own a home. What a disincentive to those who already see little point in trying to look after themselves rather than rely on the state.

One more tax to punish the self reliant ordinary people who are trying to raise families in a secure home. And basing it on house prices would be nonsense- not sure where the logic is in thinking people who live in expensive areas somehow have more money because they are forced to spend more on somewhere to live. Not my fault I am from the SE. And I work in a critical job in public sector in London so no I can’t move to Grimsby.

What has the value of a property got to do with the occupants’ consumption of local services anyway?

We are lucky enough to own our own home outright, so it's not the case that it's only some jealous non-owners who want to introduce property taxes.

It just makes sense to get rid of the friction of SDLT and the inequity of Council Tax and replace them with an annual home value tax and poll tax. Incidentally, it's the Poll Tax that would largely service a person's consumption of local services, whether they owned or rented. I mean, it's a nonsense that an elderly couple of two pay the same as a family of five adults in two halves of a pair of semi's.

The effect will be to moderate house prices so that over-paying no longer becomes attractive and they become more affordable nationwide. Homes are for living in - not generating money. I couldn't care less what my home is "worth" - it's just shelter to me and my family.

No, because it will just put the prices up. Vendors sell for the highest price buyers can afford. If you can afford £100 and there is £10 tax, the price will be £90. If there is no tax the price will be £100. If there is £20 tax the price will be £80. It will always cost the buyer all they can afford.

Buyers will not benefit.

But vendors will pocket the difference.