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?

What exactly about SDLT is stopping you from moving? Is it just that you resent paying a chunk of money or are there other factors? Presumably, if you have adult children, you bought some decades ago and have made some profit on the house?

Yes, stamp duty is a massive damper on the housing market. I'd like to move at some point but as things stand I'd need to save for 5 years just to pay the stamp duty.

I get the argument that if it was abolished house prices would rise a bit to compensate, but I still think the market would move faster as people would be happier to spend the same £50k on buying more equity in a house, so it is part of their assets, than they are on a tax which means they'll never see the money again in any form.

We call it LBBT in Scotland and we pay even more. £27k for a house costing £500k and I think stamp duty on same property in England is c £15k.

I was too young to understand at the time but I do remember my parents talking about job losses amongst acquitances.
I think there were several causes of that downturn-rising inflation, oil shock, recession, big rise in unemployment, bubble of late 1980s bursting, partially caused by ? Lawson changing taxes and announcing this in advance so everyone piled in.
I dount any government will be socially responsible enough to deliberately deflate the housing bubble but I think events will overtake them.

My parents moved at the end of last year. They paid about the same for the new place as the old one but had the bill for SD of almost £40k. Yes. It nearly stopped them moving because it’s such a large amount so they had to save this up before they could put their house on the market as it wasn’t included in the sale price.

I much preferred the proposal floated a year or two ago that suggested merging council and stamp duty into one tax. Council tax was replaced by annual tax on property value up to £500k and any value over that was considered for the stamp duty replacement.

SDLT is a massive disincentive to move, which is a problem for downsizing.

I do find downsizers moaning about SD a little annoying. They tend to be the ones with shit loads of equity. SD is much harder for those starting out.

It's not actually great for the economy for the housing market to continually inflate far beyond wages so probably stamp duty should be increased, not decreased.

If wages don't increase and house prices do, then your house isn't worth more, your money is worth less.

Imagine how this economy would be humming if people were spending that money into the real economy, buying goods and services.

The vendor should pay it as they have made the profit on the property.

Imagine how this economy would be humming if people were spending that money into the real economy, buying goods and services.

Absolutely

The government can’t afford to scrap stamp duty and if they did they would be more insane than they are right now.

I’m absolutely no fan of the principle of stamp duty but right now it’s baked in. The ‘market’ you want to help would swallow that cash overnight as people would suddenly have more cash available for their move and due to competition for houses, prices would rise immediately. There would be no gain for the wider economy as suggested by a pp because there would be no more cash in anyone’s pocket, everyone would be hand wringing about how they can’t afford to move because of house prices and the government would have lost billions per year.

And to another pp saying people wouldn’t mind paying more the house if it would buy them a bit more equity. It wouldn’t, unless you are a cash buyer house price rises would mean it would buy you more debt with the associated interest payments for a long time before it turns into equity. Seriously, economics people.

I agree it should be abolished and I agree it would impact the economy positively.
I bought a house 18months ago. The money i spent on stamp duty would have gone straight back into the economy in the form of materials and labour to do the work the house I need/want doing.

It’s not about the overall cost of the property - it’s about the disincentive to move as you actively lose money with each transaction.

My net worth is £100k less if I move house. I have to earn £200k pre tax to earn that £100k. That means I will avoid moving if at all possible.

No. Last time they did this the housing market surged in price/ house values. It stayed high after. Great if you own a home, awful for trying to buy. Long term it just ends up pricing more people out of home ownership altogether which is not going to help those sales.

It’s definitely stopped us moving. I’m scared of making the wrong move and the cost to move again.

No it wouldn’t! House prices settle at maximum affordability - by means of lots of different levers. As soon as more money became available house prices rise and you pay more. That sadly is a fact. Look at patterns over time - when two salaries started to become the norm, when interest rates fall overtime, the COVID stamp duty holidays.

It helps people trying to buy right then but it rockets the market upwards soon after.

Yes it should be abolished. We were looking to move house and downsize but have decided against it because of stamp duty.

How do people propose the loss in tax take is made up if SD is abolished?

More income tax, more VAT?

Presumably in a way it doesn’t affect them!

Lots of European countries have annual property taxes but they won’t do that here. The majority of the expensive houses are owned by older generations.

Exactly 💯.
If a person spends 20,000 pounds on materials and labor to do a renovation or improvements then that 20,000 pounds will initially create VAT and income tax, and the amount the recipients of the 20,000 pounds will be spent in the local economy, and so on and so on.
Look at what is called the recirculation of money and you can see the impact it can have on a community and country.
It falls down a bit if all the money is being spent on products and services that come from other economic environments such as countries, as the money and profits enter that economic recirculation.

https://www.investopedia.com/terms/circular-flow-of-income.asp

"And to another pp saying people wouldn’t mind paying more the house if it would buy them a bit more equity. It wouldn’t, unless you are a cash buyer house price rises would mean it would buy you more debt with the associated interest payments for a long time before it turns into equity. Seriously, economics people."

Say I'm planning to buy a house that costs £750k and would have to pay £50k (or whatever) stamp duty, which I've saved up over the years. Then stamp duty is cut/abolished and the house price goes up to £800k to compensate. The £50k I'd have paid on stamp duty now goes on buying the extra £50k in equity. Economically maybe there isn't much difference, but I would feel much better about it and would not be disincentivised from buying the house by the stamp duty cost, as I am now,

My parents didn’t have any equity. They had to save up the stamp duty.

I’m starting to think economics should become a compulsory subject at school.

Lesson number one: keep increasing the minimum wage and taxing employers instead of employees does not mean anyone has more money in their pocket because those costs are passed on and the cost of living rises.

Lesson number two: if you make more money available at the time people want to buy a house (interest rates/stamp duty/govt assistance) house prices rise to absorb that extra cash. This is because availability of finance and availability of houses are the two controls on the market.

These are short term measures which cause long term inflation.

I am absolutely in favour of people having more money, but economic principles may bend but then don’t snap,

I do think there should be hard bands for stamp duty though (governments may like them because it allows for stealth tax increases).

That doesn’t change the statistics…