Glimmer Of Home For Stamp Duty Changes?
There may have indications from the Government that Stamp Duty could be reformed within the tac changes in response to the pandemic.
Conservative MP Alberto Costa, in a written question to the Treasury asked the “potential merits of introducing a stamp duty holiday for people purchasing new homes as a means of stimulating the economy after the covid-19 outbreak.”
This follows a report last week from the Cass Business School that “urged the Government to extend Stamp Duty relief to ‘last time buyers’”. This would see elderly people being encouraged to downsize by offering the same relief that benefits first-time buyers. The report claimed that there were more than 15m surplus bedrooms in the UK, with a concentration of elderly ‘under-occupying’ properties.
There have also been calls from property search website Zoopla for a Stamp Duty holiday that could ‘encourage more home owners to move which in turn could help fuel economic activity in other sectors’.
Grainne Gilmore, Head of Research at Zoopla wrote:
“The ‘holiday’ means there is impetus to act, as it is not a permanent change. While this could expedite activity that would have happened anyway, when trying to kick-start the economy this is accepted.
A stamp duty holiday not only helps people across the country achieve their housing goals, it also contributes to economic activity.
When people move home, their consumption of goods and services increases as they organise their finances and utilities, decorate and renovate. This ‘network’ effect on the economy means that governments are always keen to stimulate housing mobility.”
However during the lockdown it was predicted that the Treasury could lose up to £5 billion in lost Stamp Duty from the locking down of the property market, due to the coronavirus. It could therefore seem unlikely that the Treasury will want to offer a Stamp Duty holiday for any buyers that are not already eligible.
Commenting on the predictions, Jeremy Leaf, north London estate agent and a former RICS residential survey, told Property Industry EYE:
“These sort of short, sharp shocks like coronavirus tend to have a bigger impact on transactions and hence stamp duty than on prices, at least initially.
“When we come out the other side, the Government will be looking to make up as much of its losses as possible, not just from Stamp Duty but from the furlough scheme. No doubt we will see an increase in taxes generally but I would hope that it doesn’t stifle the housing market with higher Stamp Duty.
“The more the Government penalises transactions, the more Stamp Duty will be compromised. It needs to make sure that after this is over the number of transactions rises, helping the economy as a whole. It is not just good for the property market but will help get so many trades back into work and earning and paying taxes of their own.”
Buying agent Camilla Dell, managing partner at Black Brick, added that Stamp Duty will most probably not be raised in the future to offset the losses;
“If you look at past recessions and the speed of the property market recovery, we can predict that the Treasury will most likely not raise Stamp Duty to make up for this until a year or so down the line, once property prices and transactions have risen again.
“Data being used by a range of sources suggests that if we look at the 2008 financial crisis as an example, property transactions fell by 57% and prices by 19%, and it took around six years for transactions to recover properly – this could give us some rough guidance.
“Generally, I would say, ‘never say never’ to a potential stamp duty rise, after all, money will have to come from somewhere to pay for all of the money government is spending and lending, but I doubt Stamp Duty will be targeted as we are already one of the highest rates globally.”
The response to MP Alberto Costa’s question however, seems to have offered a very small glimmer of home in that despite there being no plans to reform Stamp Duty as a whole, the government is always reviewing its tax policies in response to the pandemic.
Jesse Norman, the Financial Secretary to the Treasury stated;
“Vital measures to control the spread of COVID-19, such as social distancing, have resulted in a drop in property transactions. From 13 May in England, viewings can once again be held as long as social distancing measures remain in place, and people can move house safely.
“The Government does not currently have any plans to change the amount of Stamp Duty on property purchases. However, the Government keeps all tax policy under review, including as part of the response to the COVID-19 pandemic.”