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?

No, capping mortgage loans gradually would cause prices to fall, enabling more people to buy over time. The current situation already restricts basic property rights, puts many people into financial hardship and reduces spending on goods and services.
Demand is the number who want to buy and can afford to buy (directly linked to credit). Supply, in the housing market, is the number looking to sell at any given time.Yes, overall housing units and immigration make some difference but less than incomes and access to debt.

I think high stamp duty is definitely one factor that is pulling prices down. What actually happened during Rishi's stamp duty holiday was that sellers added thousands to their asking prices and because of the lower stamp duty, plus people saving £££ during lockdowns and the record low interest rates, people rushed to buy. I agree with you that SD is a factor that reduces transactions though. The main factor at present, though is that people simply cannot afford the asking prices in many areas, hence all the 'nothing's selling' comments.

Mortgage lending is already capped at around 4.5x income though and you need a decent deposit and then stamp duty on top. House prices haven't fallen with the 4.5x income restrictions. Drop it much lower and even more people will be renting forever or locked into staying in houses because they can't move or mortgage prisoners unable to renew their mortgages at a decent rate

And so would many parents. I'm just making the point that this is a systems failure. If prices fell, younger people, with an average job, would be able to buy without needing £££ gifts.

I've seen products where lenders are prepared to lend a fair bit more than that.
These 'restrictions' aren't restrictions. They represent a massive expansion in credit (deregulation in the late 80s particularly) compared to a few decades ago, when lending was generally based on 3 times one salary.
As I said, if multiples reduce gradually, prices would gradually fall, giving more young people a chance. We already have a situation where so many people are not leaving their parents home or renting forever. It is already causing huge social problems.

My point is about supply and demand. In this case the demand is being partly driven by banks giving out big loans. And buy to let loans. If private letting is restricted, more houses come on the market, and prices go down.

It is because people have been buying to let that there are less houses on the market, driving prices up, and demand for rentals to go up too.

@rainingsnoring I understand your explanation about the SD as a one-off being more efficient than adding it on as debt if house prices increase. That makes sense and I hadn’t considered it. The thing when downsizing though is that you’re towards the end of your working life and you’re not looking at making more money in the future with increase in income. The house may be your only asset and that is IT. The SD for even a 2-3 bed house is a huge chunk you’ll never “recover”.

I think it was only 2.5x joint income when we bought. Even then we didn’t use all that as we’re risk averse and we had a few good choices of flats. I hadn’t realised it’s now 4.5x, madness.

The problem here isn’t the stamp duty. Of course you want to help your kids because it will be really hard for them to buy a house otherwise. The increase in value of your house has contributed to the ridiculous house price inflation that makes it unaffordable to buy a house when you are young. We are stuck in this trap, and something needs to shift.

We are at a point where owning a house is wealth.

It’s not wrong at all. I could post 20 links right now off rightmove 🤣

Ha true! But younger people wanting to buy a house afford to fund a random persons care home either 🤣

And of course, helping their kids will make it worse. That money is feeding the bubble. The sellers do not have to drop their price so they get their significant return on their investment. And what better way to invest that profit than in buying more property. It's a classic capitalist ever decreasing circle of wealth creating wealth and locking others out.

But owning a house doesn't mean you own the whole house, you might only own a small percentage. If you need to move to the next house you have to pay estate agent fees, solicitors fees on both houses then stamp duty. That isn't wealth

If there was no stamp duty you could use the 50k to install a lovely new kitchen :)

But yeah some of these houses haven’t been touched for decades. Like the owners have been in for 40 years and not replaced bathrooms and kitchens. And there are other houses for the same price with modern interiors - they tend to sell fast.

There is an outdated house near us which had the price reduced - last August!! Ffs. They clearly don’t realise how overpriced their house is or it would have sold. Another house gone on for £1.4m and hasn’t sold so they’ve now switched agent as though that’s going to solve the issue.

Also there are people who overpaid in 2022 and now wanting a big increase on what they bought for without realising prices are static since then or actually lower.

Someone who owns one house and moves house every year (same value house) is not wealthier than someone who owns the same house for 50 years but they pay vastly more tax. There is no economic justification for this.

In my home town a four bed house would cost a minimum of £500k (£15k SDLT). These houses are usually bought by upsizers. They're not selling. Three bed semis are the most requested.
When the stamp duty holiday came in 2020 the car industry got a boost. The money was used for a family cars. People feel wealthy if the own more equity.
People outbid each other and there was little to buy as it went in days.
Now a lot of these houses are being put to market but if you need a mortgage you need a £100k salary and those jobs are far and few between.
My DS refused to buy a flat as he wanted to be able to stay in his home if he started a family. A wise decision I think.
I asked the question as our local agent has started laying people off and they are 60% down. The new houses near us are paying the stamp duty.

Quote :"When the stamp duty holiday came in 2020 the car industry got a boost."

I think what is nearly always overlooked in any tax threads is the Government spend the money raised by tax. They might spend it on benefits, in which case most of it goes straight back into the economy. Likewise if they spend it on health or defense. The Government are spending it, not banking it.

So when you say the car industry got a boost before, another industry will have lost out.

Taxation does create money circulation. And that has to be better than too much being stuck in a bank ?

There will be people in London and the South East trying to understand 3 bed terraced = tiny < £500k! Of course it's all relative. My DD lives in an area with great state schools and houses are still selling fast (even fixer-uppers), going for well over valuation. I also follow the market in Midlothian and it seems to be buoyant, despite (or maybe because of) lots of new builds?

I also wondered that, I think the OP means "help prices remain high but make it easier for me to sell".
Surely the best possible way to help the housing market is for prices to fall. Looks likley that thats about to happen. Thankfully imo for younger generations. High house prices only benefit the banks (or downsizers cashing in). The economy and younger generations need prices to readjust to the now normalised costs of borrowing. Never mind needing to account for the high inflation and costs of living increases that are coming...
Im not a fan of stamp duty either - but we do have a massive financial black hole to fill. I can't see its possible anymore to give the housing market a free pass from taxation. Thats part of what caused house prices to get out so out of kilter with earnings in times gone by.

The current level of SDLT is definitely a brake on the housing market. It is also distorting it as has already been suggested. FTBs are not buying flats anymore as they can't afford to pay the tax to move up every few years.

I do think some incentive is needed to get the market moving. I don't have the figures to back this up but I imagine that if the SDLT rate is halved, maybe the number of sales would increase. If the number of sales doubled, the tax take would be the same. I would love to see some predictions around the effect of decreasing SDLT as it might not be as disasterous to HMRC as is being suggested.

@FalseSpringI believe when the stamp duty break ( to £500k) happened the receipts were higher because the tiers were adjusted. I cannot find the stats but is one of the reasons for market inactivity our local agent is trotting out . You only paid over this amount. I agree it's a bit delusional but people are funny about this tax and hate paying it.
Fwiw I would favour the original suggestion of a 2p the pound income tax rise. Obviously not in labours manifesto.

The housing market is slow at the moment, but not non existant. And at times when its more prominent as a market and more movement then of course its a significant thing. Its gone up in recent years as an overall income for government despite housing slumps.

This won’t benefit me but perhaps there needs to be a downsizers discount in stamp duty for anyone over 65… That would get the top of the chain flowing and possibly the first and second rung if older sellers move to smaller houses and flats.

Well they potentially are if they can afford to move every year, regardless of stamp duty. But that is irrelevant to your original point. If you own property, you are wealthy.

I’m sorry but I disagree. There are plenty of people who can’t even afford to buy a share of a house. If you can, you are wealthier than them.