New research suggests that the effect of stamp duty on people who move more is having a knock-on effect on the property market.
According to the findings from Santander Mortgages and the Centre for Economics and Business Research, a further 146,000 property transactions would have occurred over a period of five years had the tax been removed.
As well as potentially discouraging buyers, the research also indicated that SDLT could be reducing the incentive to build more homes, given that the vendor pays for a portion of the tax if sold at a reduced price. In turn, the profitability margin falls and areas suitable for development could become less appealing to house builders.
The research comes in the run-up to next week’s budget, as well as following numerous other criticisms of the tax and calls for the Chancellor to ‘take his foot off the brake’.
The monthly report from the Royal Institute of Chartered Surveyors showed a subdued UK property market, in terms of both sales and demand. Whilst stamp duty may not be the only factor attributed to stifled transactions, figures indicate that its softening could boost transactions, and in turn, transaction growth.
A recent study showed that 22% of people who had recently bought a home would think about moving if the tax was reduced, even for a temporary period. The Aldermore study also revealed that a stamp duty cut would be an incentive for 15% to make their way up the housing ladder, having purchased their first home over four years ago. However, the most significant impact of a cut would appear to be on those looking to buy their first home; the study showed that 30% of first-time buyers would think about bringing their house hunting plans forward if a reform to the tax was announced in the Budget next Wednesday.
Sharing his thoughts on the report was Miguel Sard. The Managing Director of Mortgages at Santander UK drew attention to the wider impact of the tax, especially on the younger generation of prospective home buyers.
“The report highlights the unintended consequences of Stamp Duty. First-time buyers struggle to get on the ladder, young families want to move up it and the elderly want to downsize, but all are stifled by Stamp Duty.
“Those aged between 65 and 74 have the greatest average property wealth in this country, and youths have the least. The housing market needs to allow for adjustments in demographics to be mirrored by the supply of accommodation.”
Also commenting on the report was Economist at the Centre for Economics and Business Research, Christian Jaccarini. He drew attention to how the tax had dampened transaction volumes, stating: “While the under-supply of housing has rightly received much attention, our research shows that Stamp Duty significantly impedes housing transactions, meaning that we don’t maximise the benefit from the existing housing stock. In fact, we estimate that 146,000 more transactions would have taken place in the 5 years to June 2017 if Stamp Duty was removed entirely. The Chancellor should seize this opportunity and make Stamp Duty reform a priority at the upcoming Autumn Budget.”
