Following recent discussions on the future of stamp duty land tax (SDLT), a property expert has emphasised the impact it could have in enabling final steppers to downsize.
According to the research by Reallymoving, the incentive of selling without losing a substantial slice of the equity to SDLT could free up a huge amount of family housing stock.
Currently, over a million older homeowners over the age of 65 live in accommodation with one or two spare bedrooms, according to data from Policy Exchange. Although not all of these owners will want to sell their family homes, the knowledge that they will not be adversely penalised through SDLT may act as a catalyst for a family home exodus.
The figures, provided by HM Revenue and Customs (HMRC) data for 2017/18, suggest that the contributions made by over 65s is minimal with only 7% of total SDLT receipts coming from downsizers. The £938 million paid in SDLT contributions by downsizers pales in comparison to the £13 billion accrued overall.
Having a particular emphasis on helping this section of the market could help promote a healthy flow of transactions throughout the whole market which could increase transactions and potentially cover the tax losses.
Boris Johnson had pledged to overhaul the current stamp duty land tax (SDLT) thresholds by scrapping SDLT on properties worth less than £500,000.
It would mean that, based on current levels, the average price on properties in all areas of the UK would be immune from SDLT; this includes London’s average property price of £484,584 according to the most recent HM Land Registry data.
Boris Johnson also aims to stimulate the prime sections of the property market by reversing George Osbourne’s duty increases on homes valued over £1.5 million by reducing the 12% duty to 7%.
Whilst this may not help all downsizers avoid SDLT, it is thought that changes could help reinvigorate the market and free up larger housing stock.
Rob Houghton, Chief Executive Officer of reallymoving said:
“Scrapping stamp duty for downsizers is the simplest and most cost effective way of freeing up the housing market, allowing older people to move into more suitable homes if they so wish and reducing competition among families for larger homes.
“Since downsizers account for just 7% of stamp duty contributions, this proposal wouldn’t be disastrous for the Treasury. When a larger house gets sold it enables a chain of transactions and I believe the lost stamp duty revenue would be more than recovered by boosted transaction levels across the market, not to mention the release of vast equity by over-65s which has been locked into property for decades with no benefit to the wider economy.”
