Can we blame SDLT for the reduction in residential housing transactions?
01 August 2023
HMRC has published the Stamp Duty Land Tax (SDLT) statistics for the three months to 30 June 2023, which shows a fall of 22% in the number of residential property transactions since 30 June 2021.
The sharp fall in transactions is partly explained by the SDLT holiday coming to an end in June 2021, which increased the number of transactions that took advantage of lower or no SDLT cost.
A better measure for how the housing market is performing might be to compare this quarter’s figures with the previous year. This shows a decrease of 3% in the number of transactions.
Again, it is hard to compare directly because in September 2022 the government announced that the standard rate of SDLT would not apply to transactions between £125,000 and £250,000. Additionally, the First Time Buyers’ Relief, which offers these buyers exemption from SDLT would be raised to £425,000.
The phrase was first coined in The Brooklyn Daily Eagle on Tuesday 6 December 1870 that the tax ‘tail wags the dog’. In the case of SDLT, the tax tail has been wagging furiously. It's difficult to draw clear conclusions when comparing the current SDLT receipts to those in the last few years and it's clear that tax policy on SDLT in recent years has distorted the residential property market.
Policies like the SDLT holiday, whilst no doubt well-intended, helped to inflate the residential property balloon that we are now seeing the air escape from. None-the-less, tax is far from the only factor and the current turmoil resulting from other negative aspects such as: the availability of finance, cost of borrowing, inflation, political uncertainty, poor economic performance and decrease in interest from foreign buyers offer a clearer explanation as to the drop in transactions.
The sharp fall in transactions is partly explained by the SDLT holiday coming to an end in June 2021, which increased the number of transactions that took advantage of lower or no SDLT cost.
A better measure for how the housing market is performing might be to compare this quarter’s figures with the previous year. This shows a decrease of 3% in the number of transactions.
Again, it is hard to compare directly because in September 2022 the government announced that the standard rate of SDLT would not apply to transactions between £125,000 and £250,000. Additionally, the First Time Buyers’ Relief, which offers these buyers exemption from SDLT would be raised to £425,000.
The phrase was first coined in The Brooklyn Daily Eagle on Tuesday 6 December 1870 that the tax ‘tail wags the dog’. In the case of SDLT, the tax tail has been wagging furiously. It's difficult to draw clear conclusions when comparing the current SDLT receipts to those in the last few years and it's clear that tax policy on SDLT in recent years has distorted the residential property market.
Policies like the SDLT holiday, whilst no doubt well-intended, helped to inflate the residential property balloon that we are now seeing the air escape from. None-the-less, tax is far from the only factor and the current turmoil resulting from other negative aspects such as: the availability of finance, cost of borrowing, inflation, political uncertainty, poor economic performance and decrease in interest from foreign buyers offer a clearer explanation as to the drop in transactions.
Adrian Benosiglio
Partner, Real Estate Tax
Adrian Benosiglio
Partner, Real Estate Tax