Stamp duty reform is being considered ahead of the Autumn Budget, according to reports. The proposals, if they go forward, could make a massive difference to the housing market.
Said to be among the “bold measures” being studied by Chancellor Philip Hammond, a government source claims that stamp duty reform will help people in their twenties and thirties, and restore “intergenerational fairness” to the system.
Stamp duty is charged on all homes over £125,000 and rises with the purchase price. This means it is a substantial extra cost that is preventing people from buying their first home. In London, the situation is especially difficult for first-time buyers as the average purchase price is £490,000, which currently results in a £14,000 stamp duty bill.
The latest NAEA monthly Housing Report shows that the proportion of sales made to first-time buyers fell from 30% in June 2017, to just 23% in July 2017.
Earlier this week, the Government held a crucial housing summit at Downing Street to discuss problems in the housing market. Cutting stamp duty is just one of the ideas being put forward by backbenchers and lobbyists. Other proposals include freeing up Green Belt land for development.
This is crucial at a time where the Government needs to restore young people’s faith in the system. According to one Tory source: “The Budget is a good opportunity to seize the political initiative domestically through bold measures on issues like housing.”
Speaking on BBC Radio 4’s Today programme, former Tory minister David Willetts said: “If you are 30 now you are probably earning less than someone who was aged 30, 10 years ago. Anything that rebalances and helps young people, I’d be in favour of.” However, he stressed that tight public finances mean that any help given to one part of the population will need to be offset by increases elsewhere. This has prompted concerns that older people will need to pay more taxes to fund such a measure.
Historically, a stamp duty holiday was used by John Major in 1992 to revive the market. However, critics argue that without an increase in new homes, any cut could backfire by driving up house prices. This is backed up by Treasury studies.
The Chancellor will present his Autumn Budget to Parliament on 22nd November 2017.
