Property experts discuss Government Stamp duty relief proposals
The issue of stamp duty relief is high on the Government’s agenda with a lot of speculation as to how best to improve the flow of housemovers.
Lord Best, a member of the All Party Parliamentary Group on Housing and Care for Older people believes the abolishment of stamp duty for elderly people looking to downsize will encourage movement, creating a greater stock of family homes for those that need it.
Industry experts discuss whether abolishing stamp duty relief for the elderly would improve the house moving process and what the impact on conveyancing sector would be…
Beth Rudolf, Director of Delivery at Conveyancing Association (CA), commented: “In theory, reducing stamp duty for those downsizing makes sense but the practicalities and complexities around how it could be delivered are likely to be fraught with difficulty. At a very base level, how would you know when someone is downsizing? Does it have to be someone ‘older’ or anyone downsizing, for example, a single mum moving from the matrimonial home when the kids go to university? Or is it anything that frees up family homes for families? It could only apply to the replacement of the seller’s main residence in the same way that capital gains tax does. That said, it would be a very tricky one to identify. If it was just based on price, how would that apply if someone is moving regions – they might be selling a two-bed flat in London but buying a four-bed house in Yorkshire; in this example, the price of the purchase looks less but the size of property is bigger so is it truly downsizing? Even if it was done based on a reduced square footage, the area might be divided into more bedrooms. If it was done on the number of bedrooms then what happens if one is really just a box room.
“I suspect that these difficulties might well mean the Government kicks this particular idea into the long grass, and when you consider that its focus has been predominantly on first-time buyers, then a focus on older downsizers appears even more unlikely. However, what would certainly benefit the entire housing market would be cuts to stamp duty right across the board, including the extra charges faced by ‘additional property’ owners which has done such damage to the buy-to-let market. High levels of stamp duty are putting many potential purchasers off and the CA’s view is that the Government has lee-way to reduce the charges for all purchasers, not just first-time buyers, second-steppers or downsizers. Much of the analysis shows that when stamp duty is cut, transactions increase and the Government’s take from stamp duty also improves. The housing market appears to need a shot in the arm and the Chancellor’s November Budget can provide this however we would caution against piecemeal, overly-complicated forays into this space, and would request that any cuts are simple to understand and provide benefit to all those who would like to buy.”
Harvey Harding, Managing Director of PM Property Lawyers said “Abolishing stamp duty relief for elderly downsizers may encourage movement, but it’s also likely to provoke an outcry amongst younger people. There is already a perception that the baby boomer generation have had many advantages that haven’t been passed on: low house prices, final salary pension schemes and a lower retirement age, cheaper transport, travel, communications, jobs for life and a large chunk of NHS resource. 69% of the UK’s housing equity is owned by the over 55s, many of them owning homes that have rocketed in value. Rightly or wrongly, millennials feel hard done by and giving the older generation yet more rewards may not be popular.
Conversely, thanks to this equity and the ‘bank of mum and dad’ is funding more and more property purchases and at the same time, locking the elderly into the properties on which they have raised a lifetime mortgage or other such vehicle, meaning they cannot downsize.
An alternative could be a scheme of deferred SDLT – meaning that it is payable upon death or over a period of time, meaning that the same amount is payable, just in a more manageable way, which may encourage movement without the resentment.
The key to all of this is housing stock and attractive housing stock to all, not just first time buyers (of which there is still an enormous requirement) but downsizers, such as modern sheltered and supported housing – attractive housing will make a difference too.
And finally – switching the burden of SDLT to sellers – a non-starter in my view. Could you imagine the outcry of all those buyers who conceivably will pay stamp duty twice when they come to sell?!”
Dev Malle, Group Distribution Director of My Home Move further adds. He said: “For some time when we looked at housing movement, many looked at the first rung of the ladder and the positive impact first-time buyers (FTBs) have, often being referred to as the lifeblood of a strong housing market. Over time, commentators started to highlight that with limited New Build supply, second-steppers are just as important, to ensure that stock is being released for FTBs. However, the debate has finally made it to the top of the “chain” and varying opinions have been given on how the senior population is encouraged to downsize into more suitable properties.
Stamp duty relief would certainly encourage this movement, as it would be one less disincentive. However, let’s empathise for a second with the people this type of initiative would be targeting, who in all likelihood are those who have retired. At their stage in life, what do they need? The comfort of family close by, the Doctors that they have known for many years, shops and services within walking distance and perhaps even a local pub where they are part of the community. And that’s all without considering the types of properties that would be considered more suitable.
The issue therefore isn’t just a cash incentive, but the right type of stock in the right location. As with many aspects of housing, it’s not so straight forward and the perceived quality of life is probably more important for the Downsizer group than it is for FTBs.
Although the term is somewhat overused, what is required is a “joined up” housing policy that is adjusted and tailored geographically, based on needs. Let’s remember, we continue to have a reduced tax burden for FTBs at the moment and reducing further tax at the other end would mean the burden is pushed on to the middle groups, as I am sure the Chancellor would need to make up the shortfalls somewhere.”