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?

The price of housing determines the decision whether or not to own a house (or how valuable a house). The price of moving (including stamp duty) determines the decision to move from owning one house to a different house (perhaps in a different location, or a bungalow rather than a town house, or downsizing). They are different things.

@meltingmoaner oh, I agree with you there. DH and I bought our first property in ‘99 on two v average wages then. This is only our second one, with a year or two rental in between while looking for the right location, schools etc. We are risk averse generally re money, which is why downsizing is a big step.

@MidnightPatrol because FTBs are older now and the traditional starting point a flat isn’t necessarily a good investment, house prices are increasing faster than flats in many areas so the gap gets bigger. Hence why so many FTBs are now skipping the flat stage.

It should be removed for primary residence and increased hugely for any other homes

Primary residence sales are the bulk of sales so this wouldn’t be practical. The govt would lose loads of money. Let’s say approx 90% of sales are primary residence. Do you really think the remaining 10% of sales could generate a replacement amount of stamp duty? Some stamp duty is reasonable. The govt have just become unreasonable and greedy.

That is, again, a separate issue to stamp duty.

Where your older FTBers fit into the stamp duty issue, is that they haven’t accumulated lots of equity and so moving with a large stamp duty bill is very punitive vs the downsizers who have a fully paid off house.

The housing ladder doesn’t really work to move every 5-10 years if you lose tens of thousands of pounds each time in additional tax.

What needs to change to shift the housing market, is that people need to get realistic about the value of their house, and house price inflation needs to slow. Even move to deflation. The reason the market is stuck is that most people can’t afford to buy houses for the prices they are selling for.

@MidnightPatrol its not a separate point to the question you asked. The concept of climbing the property ladder doesn’t really exist for young people regardless of stamp duty because more expensive housing, longer terms, higher deposits and stagnant wages make moving expensive.

Stamp duty doesn’t help but moving house regularly hasn’t been a thing for years for younger generations. The vast majority of people are not paying anything like 50k plus in stamp duty when moving.

If they upped the stamp duty thresholds at least or percentages they could still get some tax from it and maybe more frequently as people would be more willing to buy a house that could accommodate them for 5 years or so and move up. But even first time buyers are avoiding the smaller houses and waiting it out to get a bigger house because if they want to ever grow a family they can't afford the stamp duty and the moving fees again in a few years time. I imagine this is pushing the price up on the standard family size houses and pushing the houses that would normally be the first on the ladder. But those that can't wait and stretch their budgets to the slightly larger houses get stuck in the starter homes.
When I first bought this house (I'm only in my 30s) I was in my early 20s and it was just below the threshold, now it's probably £100k over because they just don't move the bands.

I do think it (and council tax) needs revision.

i think the boundaries do need revising,i don’t think removing it entirely is the way to go though, there was a study last year when the is was rumoured about it essentially being a tax relief for the wealthy and not helping further down the chain.

revising it to encourage down sizing e.g give you 6 weeks to pay after completion could also help.

but we still need that revenue to come from somewhere. The current slowing of the market is because mortgages are being pulled before completion due to the war (although I think that’s starting to level out), people are sitting tight waiting it out and the higher cost of living means people can’t afford the bigger mortgages or don’t want to risk over stretch.

Paying when you sell rather than buy is the way to go.

Great answer, but I think we can be sure it's not the one most people wanting stamp duty abolished would want to see!

Whereabouts in Scotland? I'm in Glasgow and, in the areas I'm watching, properties are mostly setting a closing date within 2 weeks! Very few fixed price.

As a homeowner with no other assets, I'd benefit from abolishing it.

As a citizen with a basic sense of objectivity, I can see that house prices need to be lower, not higher, and taxes rebalanced to focus on wealth (including primary residence ownership), not income.

So it's a no from me.

It would not more equity! It would mean more debt! That is a very bad thing.

Your parents had zero equity in their home?! I think you may be getting this wrong.

And there in lies the problem. As I said, the problem is that current asking prices are far too high relative to income. If/when they come down, over time, the young may have a chance to buy without requiring large inheritances/gifts from their parents and grandparents.

In both of those approaches, the cure would be worse than the disease. Britain needs rental homes for those who cannot buy or don't expect to be somewhere long-term, and rents are already too high. Capping mortgage loans would put homeownership out of reach for everyone without a massive house deposit. And both approaches restrict basic property rights.

You cannot repeal the law of supply and demand.

High stamp duty costs aren't pulling housing prices down though. It may well be encouraging people to keep the asking price higher to make it worth moving because if you need to pay £15k to move to your next house, you'll want to make sure you get as much as you can possibly get from your sale to cover as much of the tax as possible. It also restricts how many houses go up for sale as people just can't afford the move , so less houses on the market also increase the sales prices.
There needs to be more houses built to increase the supply and the stamp duty thresholds need to be raised to more reasonable levels to keep the market moving.

@Delphiniumandlupins- I’m in Edinburgh, in an area where a tiny 3 bed terraced is around 400-500k. LBTT is about 25k. The market has definitely slowed down here, with fixer-uppers sitting on the market as people don’t have the money to do costly renovations on an already-expensive property.

I know the market in Glasgow, where it’s more affordable, is more buoyant.

I think people are cautious about moving as there was hope that perhaps the Iran situation would resolve, mortgage rates would come down & fuel/food prices would ease. But if anything it looks like things are getting worse, so there’s less confidence in the market & people are already maxed-out financially.

LBBT calculator says £23,350 on a £500k house. Still a lot more than England's Stamp Duty but a PP elsewhere on this thread claims a studio in their area costs £250k and I don't think anywhere in Scotland is near that!

I would prefer to spend the money on earlier retirement, travel, but I also feel responsible for my kids. I know they’re young adults but I’ll help if they need me to.

I understand what you are saying and think that your reasoning is the similar to that of many others who are holding off downsizing or perhaps upsizing too.

I am guessing that you live in London as you are talking about £100k SDLT which is far above the average for a transaction. I think SDLT undoubtedly reduces transactions at these levels. I absolutely understand why you resent paying £100k (200k of earned income). I have much less sympathy with older downsizers, who often have huge amounts of unearned equity from which they can pay the SDLT.

I don't agree fully with your logic though. The assumption that you would own an asset at that value as an ongoing thing isn't necessarily correct. It is also the case that, if we assume that house prices increase by precisely the amount as the SDLT that is no longer being paid, it would involve most buyers taking out even larger mortgages. These involve paying interest over many years. Depending on the rate and term, this could involve the mortgage holder paying three times as much in interest relative to the loan.

In my opinon, we come back to the fact that house prices are far too high relative to income. A fall would, in time, benefit the majority and would involve everyone paying less tax too.

I'm more of an economist than a politican.

But stamp duty is a tax on buying houses, not a tax on having wealth.